Guidance on your Self Assessment Tax return


Article by Drew Coles member of the Chartered Institute of Management Accountants

Self assessment tax return
Filling in your self-assessment can be time consuming and sometimes be tricky. This article will look at the more complicated aspects of your self-assessments and provide some tips and guidance to reduce mistakes.
Capital assets showing vehicles and machinery

Capital expenditure

All capital expenditure purchased for use in the business should be listed as a capital expense for tax purposes and kept on an asset register. Capital expenditure will include company cars, vans, computers and even company websites. This is ultimately because capital allowances can be allocated to this expenditure and you must keep track of any allowances used against each asset come self-assessment time.

Capital allowances

As above capital allowances can be claimed on capital expenditure purchased for business use such as company cars/vans, computers, websites etc. Sole traders are allowed to claim for annual investment allowances (AIA) and writing down allowances (WDA).

Tax deduction written on a white board

AIA

Take the Annual investment allowance for instance. This allows you to claim the whole purchase amount of your asset in the current tax year. There is a limit to claiming AIA in one year being £200,000 at the time of writing. For instance, using AIA a qualifying asset purchased for £20,000 in the tax year will allow you to claim the whole expense against your profits lowering your taxable income and your tax liability.

Mileage Allowance

Now we move on to the mileage allowance. If you use a car/van for your work you can claim a mileage allowance for the number of miles travelled at £0.45 per mile for the first 10,000 miles and then £0.25 per mile thereafter which is correct at the time of writing.
This allowance is supposed to consider the cost of servicing, fuel and capital costs therefore it can not be used in conjunction with the capital allowances for your business cars. For this reason, a calculation must be made as to which method is more tax efficient. This calculation can be based on assumed business mileage in the coming year.

Case study

We have had previous cases with clients that thought the Mileage allowance was the way to go only for us to calculate savings of over £2000 in tax liability when using the full cost method and capital allowances above. This can work both ways depending on your business circumstances.

If the mileage method is used you must keep a good record of your miles travelled for business and it is advisable to log the date, destination, work carried out and miles. This is easy to do on an Excel spreadsheet.



Car dricing up money through mileage allowance

Share gains and dividend income

You will need to pay tax on dividend income over the dividend allowance. The allowance is separate to your personal allowance and at the time of writing is £2000 for the tax year ending April 2018. Therefore, dividends received under £2000 will not be taxed. If you earn dividends over £2000 this is liable to the normal income tax bands and will be added to your total taxable income for the year
Gains on share will also need to be declared and you will need to pay tax on any amounts above your capital gains tax allowance for the year. The capital gains tax allowance currently stands at £11,700 for the year. A gain is any profit made from the sale of shares held in a corporation in the relating tax year. To calculate the gain, you will need to deduct the purchase price of the shares from the sales price and then deduct any costs to sell. The amounts should be displayed on the SA100 and SA108 supplementary pages of your tax return.



Share gains with arrow increasing with money

Working as an employee and as a sole trader

If you are working as an employee and as a sole trader earning over the threshold of £1000, you will still need to fill in a self-assessment tax return for the income received through your self-employed activities. You will also need to fill out additional information on the tax return relating to your PAYE income. This information includes the amount of tax, national insurance and income you have received through your employer throughout the tax year. This information can be found on your end of year P60 certificate.

Record keeping

As well as the capital asset list and capital allowances taken expressed above you need to keep all information and records in relation to business activities. These include bank statements, receipts, sales and purchase invoices.

Deadlines

Please see below the deadlines HMRC have in place for registering and submitting your self-assessment tax returns.

Register for Self Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership
by the 5 October 2018
Paper tax returns - Midnight 31 October 2018
Online tax returns - Midnight 31 January 2019
Pay the tax you owe - Midnight 31 January 2019



Other information

Please see this downloadable information pack from Citizen-safe which has some great information on self-assessments.

Contact us

If you need help with your self-assessment tax returns, contact us today.

Person keeping accounting records

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