Four reasons why contractors should self-assess sooner rather than later
Just as limited company contractors are getting over their festive filing deadline, another one looms large – the January 31s deadline for self-assessment, writes Amanda Swales, a director of GoSimple Tax.
And this one might be met with more trepidation. Firstly it’s HMRC you’re dealing with now, not Companies House as you were in December.
Secondly, HMRC has had to admit that its website for MTD VAT returns fell over on filing day. This is an additional reason, on top of the four we’ve listed below, why leaving your tax return to the very last minute three weeks from Friday, is for the birds.
Before that quartet, it might help you to know that we’ve recently started itemising all the items that the self-employed and other taxpayers covered by self-assessment need before landing on HMRC’s self-assessment site.
But for seasoned contractors, it can be summarised in seven words:
Make sure you gather all relevant data
Once you’re registered with HMRC to self-assess, you’ll have your own 10-digit UTR number. Alongside your NI number, this is vital to proceed on the Revenue portal.
You also need to hand evidence of all your income and expenses (and any pension or charity contributions).
Include any untaxed income too, and remember that this may not necessarily be just from self-employment. There are many other forms -- income from property or sources abroad, for example. There are supplementary pages for each type that you’ll need to include with the main tax return itself.
Four reasons not to fluff your timing
- There’s a five-day delay, potentially
Depending on how you choose to pay HMRC, you’ll need to give up to five working days for the payment to go through!
Therefore, filing as soon as possible, and at least a good working week in advance, is best as a minimum safeguard. Oh, and unlike HMRC’s MTD fail, under which tax officials fortunately won’t be issuing penalties to those whose returns came in one day late, there’s no such leniency on late payments for self-assessment. Just remember, the 31st is the filing deadline and the payment deadline.
- Your cashflow might not be ready for you to pay instantly
It’s an obvious consideration but still gets overlooked -- have you actually made provision to pay your tax bill? Put another way, have you saved enough? Or is your cashflow so tip-top that you needn’t set aside how much you owe? Usually, leaving your filing and payment to the 11th hour risks exerting unwanted financial pressure at a notoriously cash-strapped time of year.
- Your accountant could be unauthorised
For contractors with a new accountant or adviser, a bit like you need your UTR code and NI number, they’ll need to be on a Form 64-8 with HMRC sign-off. As the contractor with a new accountant, check that you have authorised them to act on your behalf. To do this (in effect, to give your accountant permission to sort your tax return for you), Form 64-8 must have been completed and approved by HMRC. Allow time for this form to not just be returned, but also potentially corrected too, as there can be the odd mistake or incorrectly filled-in field.
- You may still actually need to self-assess (yes, even you who thinks you don’t!)
If you filed a return last year and didn’t even have any tax to pay, then -- believe or not -- you still need to self-assess! And note, even if there is no extra tax to pay, and you’re late filing, you’ll still get an automatic penalty of £100 (plus an additional £10 a day at three months’ overdue, which can soar up to a ceiling of £900).
Only if HMRC has written to you to say a return is not required are you free from the process. If you’re in doubt about whether the January 31st deadline applies to you, run this helpful HMRC widget to find out. Hopefully, it won’t go the way of the MTD VAT portal and fall over just when taxpayers need it!