Service

Self Assessment

Self Assessment is not a tax, but rather a way to pay Income Tax. HMRC automatically collects tax from wages, pensions, and savings. However, if you receive any untaxed income, you must report it to HMRC in the form of a Self-Assessment Tax Return. If you are self-employed or have multiple sources of income (e.g., from property or investments), then you will most likely have to submit an annual self-assessment tax return.

Being a sole trader is often considered the simplest business structure, with approximately 3.5 million sole traders in 2020, making up around 60% of all small businesses in the UK. You have flexibility and full control over how you operate, but you are also personally liable for any debts. Plus, with Making Tax Digital (MTD) for Income Tax Self Assessment due to start in April 2024, HMRC are further tightening the rules, and the penalties for non-compliance are getting tougher. For that reason, staying on top of your tax and accounts is particularly important for sole traders.

As a sole trader, you need to keep business accounts and work out how much tax you owe each year. With so many rules around personal allowances and tax-deductibles, working out what you owe can get complicated. Furthermore, you have to keep a detailed record of all your business income and expenses for five years from each 31st January tax submission date. These records will be used to prepare your tax return. Also, you must have them ready for HMRC if they are requested.

Who needs to complete a self assessment tax return

You need to complete a self assessment tax return if you are:

  • a sole trader
  • self employed
  • a partner
  • a company director

You also need a self assessment tax return if you have:

  • Savings and investments income of more than £10,000
  • Property rental income
  • Income of more than £100,000 per year
  • Overseas income
  • Any capital gains on sale of assets

What we offer to sole traders

Motabar Accountancy has a valuable support system for sole traders. We can help you navigate your self-assessment every year, keep track of your invoices and expenses, and calculate how much tax you need to pay. We offer a complete service for sole traders which includes:

  • Registering clients/directors for Self Assessment
  • Preparation of sole trader and partnership accounts
  • Preparation of rental accounts
  • Discussing tax returns with clients and advising when and how payments should be made
  • Performing tax planning and explaining the potential liabilities based on client income
  • Calculating tax liability from total relevant income after the deduction of relevant allowances and reliefs
  • Organising tax refunds and self-assessments for clients
  • Advising on tax rules and regulations
  • Dealing with HMRC on client's behalf
  • Responding to HMRC notices of inquiry