Self Assessment tax returns can feel stressful, especially when you are not sure whether you need to file, what information to include, what expenses you can claim, or what happens if you cannot pay your tax bill. Understanding the process helps you avoid surprises, keep better records and deal with HMRC with more confidence.

About this episode

Millions of people complete Self Assessment tax returns every year. Some are self-employed, some receive rental income, some have dividends or capital gains, and others have tax situations that need reporting outside PAYE.

In this episode, we explain who may need to complete a tax return, what goes into it, what information you need to gather, what self-employed expenses you may be able to claim, and what to do if you cannot pay the tax due.

If you are self-employed and want a wider foundation first, our episode on Tax basics for self employed: What You Need to Know is a useful starting point.

Why Self Assessment tax returns matter

Self Assessment matters because it puts responsibility on you to report income, claim expenses correctly, calculate the tax position and meet the relevant deadlines.

Filing a return does not always mean you will owe tax. You may have already paid enough through PAYE, or you may even be due a refund. However, if tax is due and deadlines are missed, interest and penalties can follow.

The better your records, the easier the return becomes. Good records also help you claim what you are entitled to and support the figures if HMRC asks questions later.

Key points from this episode

Who needs to complete a Self Assessment tax return?

You may need to complete a Self Assessment tax return if your income has not been fully taxed before it reaches you, or if HMRC needs more information about your income, gains or claims.

This can include self-employed income, rental income, untaxed income, capital gains, partnership income, foreign income, dividends, or certain tax charges such as the High Income Child Benefit Charge.

For self-employed people, it is important to remember that income means sales, fees or turnover before expenses, not just profit.

What goes into a tax return?

A Self Assessment tax return usually has a main section and supplementary pages. The pages you need depend on the type of income or gains you have.

The main part includes personal details, your National Insurance number, your Unique Taxpayer Reference, and details such as savings income, pension payments, Gift Aid claims and dividends.

Supplementary pages may cover employment income, self-employment, partnerships, UK property income, overseas income, capital gains, or residence status.

What records should you gather?

Before you start your return, gather the evidence behind the numbers. Employment income may need documents such as a P60, P45 or P11D. Self-employment income should be supported by accounts, invoices, receipts and bank records.

Rental income should be supported by property records. Capital gains need details of what you sold, when you sold it, what it cost, and any allowable costs connected to the sale.

The key question is simple: can you back up the figures that go into your tax return?

What can self-employed people claim?

If you are self-employed, tax is usually based on your business profits. That means your income less tax-allowable business expenses.

Costs that are wholly and exclusively for business may be allowable. This can include items such as software subscriptions, advertising, business supplies, equipment, and other business-related costs.

Personal costs, such as holidays, cinema trips or personal drawings, are not business expenses. Mixed costs, such as mobile phone use, may need a reasonable business/private split.

Simplified expenses and mileage

Simplified expenses can make some claims easier for sole traders and partnerships. They may apply to areas such as vehicle mileage, working from home, and living at business premises.

For vehicles, you may be able to use mileage rates instead of working out the actual costs of buying and running the vehicle. However, once you choose a method for a vehicle, the choice can affect how you claim in later years.

Working from home can also involve either actual cost calculations or flat-rate methods, depending on your circumstances. Always check the current rates and rules before using old figures from previous tax years.

Key Self Assessment dates

Self Assessment has important dates. You may need to register by 5 October after the end of the tax year. Paper returns usually have an earlier deadline than online returns.

Online tax returns are normally due by 31 January, and tax due is usually payable by the same date. If you want eligible tax collected through your PAYE tax code, an earlier deadline can apply.

The original episode also referred to a specific 2021/22 filing concession. That was time-specific, so the live page should rely on current HMRC dates before publishing.

Payments on account

Payments on account can catch taxpayers by surprise. If your Self Assessment bill is high enough, HMRC may ask you to make advance payments towards the next tax year.

This can make the January payment feel larger than expected because you may have a balancing payment for the year just ended and a first payment on account for the next year.

Our episode on Payments on Account Explained: What They Are, When to Pay and How to Reduce Them goes deeper into how those payments work.

What if you cannot pay your tax?

If you cannot pay your tax bill, do not hide from it. File the return first, then deal with the payment problem.

HMRC may allow a Time to Pay arrangement if you meet the conditions. Interest may still apply, but dealing with the issue early is usually better than ignoring the bill and waiting for HMRC to chase.

If you miss a deadline and penalties become an issue, our episode on HMRC Reasonable Excuse: How to Appeal a Tax Penalty Successfully explains what to consider when challenging a penalty.

What to check before filing

• Do you need to complete a Self Assessment tax return?
• Have you registered and received your Unique Taxpayer Reference?
• Have you gathered employment, self-employment, property and investment records?
• Have you included all relevant income?
• Have you checked whether capital gains need reporting?
• Have you claimed only allowable business expenses?
• Have you checked current simplified expenses rules?
• Have you planned for payments on account?
• Have you saved enough for the tax bill?
• Have you filed before the deadline?

FAQs about Self Assessment tax returns

What is a Self Assessment tax return?

A Self Assessment tax return is how you report income, gains, tax reliefs and tax due to HMRC when your tax position is not fully dealt with automatically.

Who needs to complete a Self Assessment tax return?

You may need one if you are self-employed, receive rental income, have untaxed income, receive dividends, make capital gains, have partnership income or need to report specific tax charges.

What can I claim if I am self-employed?

You can usually claim allowable business expenses that relate to running your business. Personal costs are not allowable, and mixed-use costs may need a reasonable business/private split.

What should I do if I cannot pay my Self Assessment tax?

File the return first, then contact HMRC or check whether a Time to Pay arrangement is available. Ignoring the bill can lead to interest, penalties and more stress.

Episode Timecodes

• 00:00 – Why tax returns can feel stressful
• 00:19 – What we cover in the episode
• 00:58 – Financial awareness, profit, tax and time
• 01:25 – Who needs to complete a tax return?
• 02:40 – How income tax is worked out
• 03:00 – Core return and supplementary pages
• 03:23 – Personal details, UTR, savings, pensions and dividends
• 04:08 – Employment, self-employment, property and capital gains pages
• 04:29 – Information and evidence needed for the return
• 05:51 – What self-employed people can claim
• 06:33 – Mixed expenses and business/private splits
• 06:50 – Capital allowances and equipment
• 07:14 – Entertaining and business meetings
• 07:36 – Simplified expenses
• 08:36 – Vehicle mileage claims
• 09:52 – Working from home claims
• 10:43 – Filing dates and deadline concessions
• 11:03 – What to do if you cannot pay
• 11:23 – Time to Pay arrangements
• 11:45 – Time-specific income support reminder
• 12:02 – Final recap

Related episodes

• Personal Tax Return Explained: Who Needs One, What to Include and Key Dates
• Five mistakes to avoid on your tax return
• Tax basics for self employed: What You Need to Know

Key takeaway

Self Assessment tax returns are much easier to deal with when you know whether you need to file, what information you need, what expenses you can claim and when payment is due.

Do not wait until the deadline. Gather your records, check your tax position, save towards the bill and ask for help early if you cannot pay.

Plan it, Do it, Profit.

“Relax, do the tax, get it sorted, and give yourself time to deal with the numbers properly.”

Further Support

The I Hate Numbers podcast helps business owners understand accounting, tax, finance, profit, cash flow, and business planning in a practical way. We simplify financial topics so you can make better decisions and feel more confident with your numbers.

You can also watch more practical finance and tax support on the I Hate Numbers YouTube channel, or listen and follow on Apple Podcasts.

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If the thought of completing your tax return fills you with dread as opposed to excitement, you want to grab a glass of something strong, some painkillers at the ready, fear not, you are not alone. In this week's episode of I Hate Numbers, I'm going to talk you through who needs to bother completing a tax return,

what information you need to grab to put into your tax return, the composition of what the tax return is like in the United Kingdom, some key items you can claim if you’re self-employed, dates, and what to do if you can't pay the tax that’s due. You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive

and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode of I Hate Numbers, the podcast that's there to improve your financial awareness, up your money mindset, help you make more profit in your business, save tax and time. What a fantastic combination we have there. Let's crack on with the podcast. Now, the first thing we should do before we even dive in and start completing a tax return is to check whether we actually need to complete a tax return.

In the United Kingdom, the key groups of individuals who have to complete a tax return are those who are self-employed with income in excess of 1000 pounds, and by income we mean sales fees or turnover, not profit. If you're a landlord with rental income of more than two and a half thousand pounds, tick the box,

you are in the net. If you are what's called a higher paid employee, so you go into that magic 40% tax bracket, and you've got income from other sources that haven't been taxed at source, then you've got to complete a tax return. If you claim child benefit, and you are a higher rate taxpayer, then you are in the net,

you've got to complete a tax return. If you've made losses in either your property business, your self-employed business, losses from selling shares and securities, or elsewhere, then in order to reinforce that claim, complete a tax return. Now, the income tax return is also one where you include details of any what are called capital assets that you're selling.

So if you've got a second property, you're selling shares, you're selling works of art, anything that produces what's called a capital gain, then you should complete a tax return. Check out the show notes folks here, and I'll give you a link to a more detailed listing here, but we've pretty much covered

most of the bases. Now, income tax is worked out by totting up all the income that you get from a variety of sources. We'll dig into what those sources are in a moment. Take off any costs, any tax release and allowances that you are entitled to, take into account also any tax that you might have paid, say for example, through wages and salaries,

and what will happen is you'll either owe the taxman some, or you might get some back. And by taxman, let's be gender neutral, and we're talking about the tax office, HMRC. Let's now explore what the tax return is composed of. Now, there are two sections to the tax return. There's something called a main part or a core part, and then there are additional pages which in tax circles are called supplementary pages.

Now the core return is where you provide your personal details, such as your name, address, national insurance number. Critically, you need what's called a unique tax reference. It's a 10-digit number. If you don't have that, if you've lost it, or even if you've not registered and you know you're in the net, you must get one sorted out

asap. You provide also details of any savings income that you've got, pension payments that you've made, gift aid claims, dividends that you received. All of those go into your core return. Now, completing the return doesn't necessarily mean that you owe tax. HMRC are divided into two sections. Section one wants to see what's going on, and section two will be the people that will collect any tax that is owed to them.

Now, the additional pages or supplementary pages mostly concern the sources of where your money and income has come from. So there'll be a section for employment, self-employment, partnerships, UK property income, overseas income or gains, capital gains, or a section if you are gonna be claiming to be non-UK resident or a dual resident.

Now having decided whether you're in the net or not, the next thing is the information that you need to include in the return, and we said earlier that you need your 10-digit tax code. If you haven't got one, you must get one asap, otherwise, you'll not be able to file the return. The vast majority of people these days submit their returns electronically - online.

However, there are exceptions where you can file by paper if on religious or other grounds you don't want to use the internet. Now, the income ideally that you have and anything you put into your return, try and have some degree of evidence and source document backing up. So for employment income, the key documents that you'll need is your P60, well maybe a P11D

if your employer provides benefits in kind such as cars, such as medical insurance, they'll be included, a P45 if you've left an employer partway during the course of the year. Now, those documents are critical because they will contain not only the amount of tax and income that you've had in that year, but also give you a reference number that you need to quote.

If you are self-employed, the accounts that you prepare, or maybe your agent prepares, will be the main source of information. For property income, it's gonna be based on your rental accounts. Now, if you don't have supporting documentation or evidence, don't panic because in certain circumstances reasonable estimates can be made.

What you have got to ask yourself is, can I back up the figures that go into my tax return? The next thing I want to explore is what can you claim if you are self-employed. In general, the strap line is that your tax is based on the business profits that you earn in a period of time. It's the differences essentially between what you charge your customers and what are considered to be tax-allowable business expenses.

Now, when we say tax-allowable, there are certain things that you might spend out of your business account, which are largely personal in nature. So effectively, if you pay for a holiday, a trip, going to the cinema, personal moneys that you take out for yourself, not to do with business, then you cannot claim that as a business cost.

If you spend money on something that's purely business in nature, perhaps advertising some software subscriptions and the like, that's fine. Now, it may be that you have what are called shared or mixed expenses, typically, things like telephony costs. A mobile phone is used for both personal and for business purposes.

HMRC by concession will allow you to claim a reasonable split between the two areas. If you're a limited company, by the way, that rule does not apply to you. It's a completely different ballgame. You may also buy items such as PCs, vans, equipment to support your business. Then there's a special regime there called capital allowances, and you can claim potentially 100%

of the cost. If you entertain customers and supplies, keeping them happy, all part of that commerciality of keeping people entertained and effectively that commercial rapport going, then it's important to a commercial development, but it's not a tax-deductible cost. As a small little tip, by the way, if you have a meeting where you've got an agenda typically lasting about an hour

and the food is incidental, then you can claim that by all means. There is a regime HMRC do have which is called simplified expenses. So, if you have your receipt tucked up in the glove compartment of your vehicle, you've lost them, they're all over the place, not very good at recordkeeping, or you can't be bothered to go and add them up,

then there is a simplified regime. Two conditions. Number one, it only applies to the self-employed, and number two, your business must have sales or turnover below the VAT registration limit. Currently, for 2021, that figure is 85,000. Always check. That figure tends to fluctuate over time. Now, HMRC give you a choice,

which is very decent of them, and they say you can either claim the actual expenses you've actually incurred, adjusted for personal disallowed, or you can use what's called a scale rate, what they call the simplified regime. This regime only applies to sole traders and partnerships. Unfortunately, limited companies cannot use this regime that I'm going to explain.

The two key areas where it impacts the self-employed is in respect to transportation or working at home. Now, let's talk about transportation first of all. If you have a car or a van, which you're using for business travel to go and visit customers, to actually go to perhaps your accountant's office for a meeting,

anything that's business related, as long as you keep a clock of the mileage, you can keep a record there and you can claim 45 pence for each business mile that you travel for the first 10,000. Anything after that, and that's a lot of mileage, you claim 25 pence per mile thereafter. The option is, by the way, you actually look at the costs of running your vehicle, petrol, car tax, insurance, repairs, adjust for the actual disallowed element of personal,

and whichever is the greater you can claim. Be careful though. Once you make a decision which is better for you, the actual mileage rate, which also reflects the cost of buying the car, then you mustn't change it. You can't chop and change each year. The only time you can change the method is when you sell the vehicle.

If your transportation methodology is a motorbike or a motorcycle, then 24 pence per mile is the figure you can claim. And if you're a very healthy person who likes to travel by bike, which a number of my clients do, then you can claim 20 pence for each business mile. So you can claim mileage as well as staying healthy.

The other key area for a simplified regime is working from home. So if you've got a space in your house, in your property, your caravan, which you are usings your office, then you can either, again, claim the cost of running that household, so council tax, water rates, utility bills, work out the space that your area occupies and claim a proportion accordingly.

Alternatively, work on a skill rate, and it's based on the number of hours on average you're working on or in your business. Having talked about mileage rates going from 20 pence for a bicycle up to 45 pence for a car or a van, we then have a rate that applies to working from home. This is based on the number of hours on average you work at home, so 25 to 50 gets you 10 pounds per cal a month going up to as much as 26 pounds per month when you work in excess of 101 hours.

Check out the show notes folks, by the way, for a link for the more details. Now, dates-wise, for the 2021 tax year, HMRC have allowed a concession and given an extra month to taxpayers to file their return. Bear in mind though, interest is still charged on any taxes paid after the due date, the end of January.

So again, take that into consideration. If you manage to get your return in on time by the end of February, then you will avoid a late filing penalty. Now, for some reason, you haven't put the money aside to take care of your tax, if circumstances are such that you owe more than you were expecting, then the first thing to do is avoid being an ostrich.

Get that tax return in time, and then you make a dialogue with HMRC to effectively make a time to pay arrangement. Now, you can do this by yourself without even talking to anyone at HMRC, lovely that they are, and you can do it online. The key criteria are owing 30,000 pound or less, don't have any existing payment plans or debts of HMRC,

all your returns are up to date, and it's less than 60 days after the payment deadline. One last thing to bear in mind folks is when you do your tax return here, remember to include your self-employed grant if you have claimed that from 2021 onwards. Folks, I hope you got some value out of this podcast.

The key thing is don't panic. Relax, do the tax, get it sorted, and then reward yourself with a nice mince pie and a glass of wine. Until next week, folks, take care. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode.

We look forward to you joining us next week for another I Hate Numbers episode.