Completing your SAT return
You will need to submit an annual Self Assessment tax (SAT) return if you are a sole trader or self-employed
and you are earning more than £1,000 per year, or you are in a business partnership or run a limited company.
You will also need to submit an SAT return if you have any other untaxed income, such as:
money from renting out a property
tips and commission
income from savings
investments and dividends
You can check to see whether you need to send an SAT return to HM Revenue and Customs (HMRC) using their online tool.
You might choose to fill in an SAT return to claim income tax reliefs or if you need to prove you’re self-employed to claim Tax-Free Childcare or Maternity Allowance, for example.
Can I complete my own Self Assessment tax return?
You can complete your own SAT if you are confident that you have accurate information about
all the income that should be included and all the allowable expenses and reliefs that can help to reduce your tax bill.
However, it can be time-consuming to collect all the relevant information and to complete the online or paper forms. You should also know that the deadline for submitting your online SAT return and paying any tax owed for the previous tax year is midnight on 31 January.
If you choose to use a paper form HMRC must receive it by 31 October, following the end of the tax year.
If you don’t file your return and pay any tax due on time, you will receive an automatic fine of £100.
You can also face further fines and other possible penalties.
How Self Assessment works
Your SAT return declares how much taxable income you've earned in the previous financial year (6 April to the following 5 April) and shows any expenses or reliefs you are eligible to claim.
Self-employed people and landlords already have the option to make quarterly digital tax returns under Making Tax Digital. We don’t yet know when this might become a requirement and some people have experienced difficulties with the scheme.
You will need accurate records to support anything you include in your SAT return and HMRC can ask to see evidence. There are financial penalties for providing inaccurate information which can increase the longer it takes to put things right.
Payments on account
These are payments you make in advance towards your tax bill. HMRC will assume that you should pay the same amount in the coming year as you did in the previous year. You will normally make two payments on account each year by midnight on 31 January and 31 July. Each payment will be half your previous year’s tax bill.
There are exceptions if:
your last Self Assessment tax bill was less than £1,000
you have already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings.
If you expect your income to be significantly lower than the previous year you can apply to HMRC to reduce your payments on account.
If your earnings increase you will owe more tax than you have paid on account. The extra amount will be due on 31 January as a balancing payment, along with your payment on account for the following year.
Because of measures put in place to manage the coronavirus outbreak you can delay making your second 2020 payment on account until 31 January 2021.
Please bear in mind that if you decide to do this any balancing payment for 2020, along with your first payment on account for 2021 will be due by midnight on 31 January as well as your deferred payment.
Who can submit a Self Assessment tax return on your behalf?
You can appoint someone to make your SAT return on your behalf; they are known as an ‘agent’.
They can be a qualified accountant or tax advisor, a friend or family member or someone from a voluntary organisation.
Whoever you choose, they must meet HMRC’s standards for agents.
Why work with a professional?
If you choose to work with a qualified professional you will benefit from their expertise and experience of working with HMRC.
They will know what you can off-set against your income and other ways in which your liabilities can be reduced.
While you will need to pay for a professional’s time, they will be able to complete the process more quickly and you can be confident
that the information will be accurate and that your SAT return will be submitted on time.
Making SAT returns easy
We recommend Cloud-based Xero software to our clients because it is an easy and accurate way to maintain all the financial records for your business. This means you will always have a clear picture of how much tax you will need to pay, before you have to make your SAT submission.
Combine this with Receipt Bank to automatically add your business expenses and you will simplify your SAT process.
Please get in touch to discuss your Self Assessment tax return requirements.