Self-Employed Accounts and Tax Return

A sole trader also known as a sole proprietor is a person who being self -employed runs his business individually. Sole trader is solely responsible for all the benefits and losses of the business. He makes business decisions independently. As a sole trader you have an absolute control on your business. The sole proprietor has no separate entity other than his business. Sole traders have to pay tax on their profits rather than corporation tax. Personal assets of the sole trader are liable to be paid against businesses debts if creditors cannot be paid. It is the responsibility of the sole trader to maintain up- to- date financial records of the owner and on time filing of tax return forms in accordance with HMRC rules and regulations. Main benefit of hiring an experienced tax accountant is that he will apply all skills and rules to get benefits, relief to the business owner, admissible within legal framework.

Professional practicing accountant acts as an agent for the business to deal all matters with HRMC efficiently.

Self-assessment tax returns (SATR) is a process in which an individual or sole proprietor tells HMRC taxable income and gains for a tax year having completed a SATR. In SATR preparation and filling, an experienced and professional accountant renders the services to work out and pay what business owners owe. You would be required to complete an SATR against any notices served by HMRC. However if an SATR is required to be completed and you have not received a Unique Taxpayer Reference (UTR) then you will need to complete an SAI (The Standard Accounts Information) and send it to HMRC.

You may be required to complete a self-assessment tax returns if being a self-employed as a sole trader your income exceeds £1,000 in the previous tax year (normally 6th April to 5th April) or in other scenario you act either as a business partner or director of a limited company. Completing a tax return means here you are well aware of that how much income tax and national insurance you are legally bound to pay on the profits/ gains brought forth by your business.

You may also be required to complete a tax return if any of the followings applies to you:

-  You have earned an amount equivalent to £10,000 or more as interest on savings or investment income
-  There is an earning by you of an amount £2,500 or more from any sources of income which remain untaxed such as tips or commissions
-  You do intend to claim tax relief from pension contributions if you fall under the category of a higher rate or additional rate taxpayer
-  You are obliged to pay or repay capital gains tax against selling a property or an asset and have gained a profit thereon
-  You want to claim child benefits and either your or your partner’s income exceeds £50,000
-  You receive either a taxable income that falls under the category of foreign remittances, or you inhabit
abroad but receive an income in UK
-  You are a trustee of a registered pension scheme or any other trust
-  You are a trustee or representative of someone who ceased to exist.
-  A P800 form has been received by you from HMRC stating that you didn’t pay enough tax during the previous year, and you need to pay an outstanding sum

Due date for this process is 5th October. The SATR in the form of notice is normally issued by the HMRC on 6th April following the tax year. In case of first SATR, you may receive a paper copy from HMRC. The tax return runs from 6th April to 5th April each year. However if SATR is filed on-line, it is due by 31st January. Paper returns are due by 31st October. Late returns will attract penalties starting from £100 with further penalties if return remain pending for three months after due date. Persistent non-compliance will attract more penalties. A taxpayer to whom a notice to file self-assessment (SA) of tax return has not been served, has an obligation under S7 of taxes management Act of 1970 (TMA 1970) to notify HMRC regarding any tax liability. The deadline of the same is 5th October. However if a notice is issued by HMRC under S8 of TMA 1970, there is an obligation then to file a return.

Anyone who is required to file a return but misses the deadline receives an automatic £100 penalty from HMRC – in case you have an online account, this penalty will be added to it. The penalty is imposed by HMRC irrespective of the fact of whether you owe tax or not. If you fail to file the return within a period of three months – i.e by the end of April, then an additional £10 daily penalty for the next 90 days, increasing the total penalty by £900 to £1,000 can be imposed by HMRC.

Further penalties are also imposed by HMRC after six and then twelve months – and these penalties could be based on the amount of tax you owe if particularly a large sum is outstanding. On top of these penalties, you’ll be charged interest on any unpaid tax additionally. Elaboration of Late filing and late payment of tax returns attracting penalties is being outlined below.

- Late up to 3 months: Automatic penalty of £100
- Late from 3 to 6 months: A daily fee of £10 for up to 90 days.
- Late from 6 to 12 months: 5% of tax due, or £300, (whichever is greater), on top of the penalties above.
- 12 months+: A further 5% or £300 penalty, in addition to the above, but HMRC may impose fine up to 100% of the tax due.

Interest on late tax payments: we must like to let you know that in addition to the penalties mentioned above, an interest @ 5% on late payments of tax you owe would also be charged to you. Interest will be charged on both unpaid tax and unpaid penalties, so the costs can rack up quickly.

Let us take the pain out of Self Assessments: At Shakoor & Co, we are experts at looking after life’s numbers efficiently. So you can trusttracting penalties is being outlined bel us to make your Self-Assessment as worry-free as it can be. Our expert chartered certified accountants do take care of you in an effective and efficient manner. We at Shakoor & Co provide SATR preparation and electronic filing.

You don’t need to submit any returns or calculate taxes as we do it for you effectively. Our skilled and specialized tax accountants render services at their optimal level within minimum budgets.

Sole traders are not required to file Accounts with any public body like HMRC or Companies House. But they must prepare Profit and Loss Account and Balance Sheet. Maintaining proper record would be useful in tax calculation and manage business, audit trail.

Investigation of sole traders accounts, not prepared accurately, by HMRC may lead to higher tax bill. It could be a stressful and time taking process and rarely welcome by sole traders.

Self-Assessment tax return contains the questions like:
- Details of untaxed income including income derived from dividends, self-employment, interest on shares and capital gains
- Record of expenses relating to self-employment

What expenses a sole trader can claim?

Claim of any deduction requires proof. Expense must have incurred for the conduct of business sole trader is engaged in. Sole trader must maintain receipts, bank statements, contracts and financial statements as well.

Normally HMRC check record up to one year. But it could go beyond that if find some deceitfulness.

There are certain factors which could trigger an HMRC investigation. A sole trader with small business volume claims an abnormal VAT and a business with a greater turnover declares a small amount of tax. Investigation triggers on presentation of miscalculated and or understated or overstated figures to HMRC.

Expenses proof are not required to submitted along with tax return. But Sole Traders must maintain expenses proofs because HMRC could ask. Proper and accurate business record should be maintained by sole traders.

If you are managing your business and have good knowledge of the UK taxation, most probably you could do your own self-assessment tax return. But it is advised to let a professional accountant prepare and file it for you.

- Get yourself registered for self-Assessment if not already registered with HMRC.
- You need to prepare sole trader accounts with profit and loss and balance sheet
- Once accounts are prepared, you need to adjust the accounting profit/loss to get taxable profit/loss
- If you have more than one business, you are required to prepare sole-trader accounts for each business
- Any other taxable income or benefits will also be included in the tax return
- You will be required to apply appropriate tax rates to calculate the tax liability
- You will have to keep in view deadlines and penalties for late submission.

It depends on how much work is involved. Well maintained and reconciled accounting records would take minimum time and vice versa. A sole trader accounts with 500 transactions would take 2 to 3 working days in completion.

Most practising accountants charge customer based on time spent on a specific job. If client records are not maintained well, this will result in more fee.

Some accountants will offer a fixed fee for the job. In this case, even if the client records are not kept well, client will not be charged for the extra time accountant need to spend to reconcile client records.

We at Shakoor & Co offering many services with fix fee. We discuss our fee with our clients before starting a job and only once client is agree we start our work.

Yes, we have provided a quotation calculator for this. To determine the estimated cost Click Here or green quotation button on the top right of the page. It would calculate within 60 seconds. Fee quoted here would be estimated. We will discuss the job and exact fee in details please.