If your only income is from your employment, then you will pay income tax through Pay As You Earn (PAYE). However, income tax becomes more complex if you have other sources of income, or if you are a company director, in a partnership or self-employed. This is where self-assessment comes in.
Also known as filing your tax return, self-assessment is essentially just telling HMRC how much income you have received in that tax year, so they can work out how much income tax you need to pay. It’s vital, therefore, that you record and retain this information throughout the year – this of course is ‘keeping accounts’. This means keeping track of all incomings and outgoings, including everything you invoice your clients, income from other assets (e.g. rental property), costs, overheads, National Insurance (NI) contributions and tax deductible expenses. You will also need to record any dividends you receive or growth in the value of assets that you sell.
It is a lot to deal with on your own, especially if you have a business to run, and any mistakes can be very costly. An accountant or a financial adviser with tax expertise can help to minimise both the stress and the amount you may have to pay.
Find a financial adviser or accountant here.
Questions you might like to ask an accountant or financial adviser:
- When do I need to submit my tax return?
- How is my tax calculated?
- Which expenditure can I claim against the amount of tax I owe?
- Which savings and investments do I need to include in my self-assessment?