The deadline for the 2021-2022 online tax return as a self-employed worker falls on January 31 2023, and with HM Revenue and Customs (HMRC) still adapting to a string of changes, audits and tax cut U-turns, taxpayers are being encouraged to act early to ensure they are able to save vital pounds amidst the cost-of-living crisis. Alongside proprietary data from Tommys Tax, the UK’s leading tax-refund app, which revealed that over a third of the nation say tax is the one topic they understand least, HMRC has also been struggling to keep up with the rush of calls in the past months and is now coming under relentless pressure. Recent reports show that number of abandoned calls to the UK tax authority doubled from 300,000 to 600,000 since 2017. Prior to the pandemic, only 15% of customers were waiting more than 10 minutes to speak to a HMRC adviser – now, 1-in-5 callers are simply giving up due to longer wait times.
There is a clear desire for Brits to seek assistance following the chaos arising in the past month. In light of this, Tommy Mcnally, tax expert and CEO of Tommys Tax, provides a checklist for self-employed workers who may be unsure about where to start when processing their return.
Use the trading allowance for self-employed expenses:
You can claim a flat £1000 for self-employed expenses using the trading allowance – if you do so, you won’t need to keep your business receipts. The alternative is that you can claim every single business expense if your expenses supersede £1000 annually. If this is the case, you will need to keep all your receipts (or bank statements can also work) – it’s important to note that you can’t do both.
Make sure you have all the information needed for your tax return:
For self-assessment workers, the key information needed includes your income and expenditure details, meaning you must have all invoices and receipts in hand. It’s critical that you keep all your records throughout the year, as HMRC may check your return after you’ve filed, asking to see your records. You’re also required to keep your records for five years after the January 31 deadline.
You will most likely need the following details: employment income, dividends, partnership income, interest, rental income, foreign income, pension contributions, gift air, pension income, payment on account, P11D, capital gains, and redundancy lump payments or unemployment benefits. If you need to ask third parties such as banks and building societies for information, make sure you consider the time it takes for them to give it to you.
Claim pension tax relief:
For basic rate taxpayers, your 20% tax relief on pension contributions will be added automatically. If you’re at a higher (40%) or additional rate (45%), you will need to claim the additional 20 or 25% through your tax return. This money will not be paid directly into your pension pot – it will be repaid either through a tax rebate, a change in your tax code so you pay less next year, or a reduction in this year’s tax bill.
Pay your self-employed tax:
You must pay tax as a self-employed worker before the January 31 deadline. HMRC will calculate how much you owe, as well as the National Insurance contributions you need to pay. If you file your tax return late, you’ll get a £100 penalty if it’s up to three months late. If you still haven’t paid after this time, the penalty is much more.
Add your tax-deductible expenses:
The experts at Tommys Tax have compiled a list of 33 types of expenses you can claim back as a self-employed worker – you can find the full article here.
The average amount that can be claimed by a self-assessment worker ranges anywhere from £2000- £3000. Tommys Tax normally caps the expenses at £4500, so unless the customer is a higher earner, the refund amount will not change.
With this in mind, Tommys Tax aims to bridge the disconnect between Britain’s population and the tax industry. The HMRC registered tax refund app was founded in 2015 by Tommy Mcnally, after he noticed the lack of tax knowledge and support for CIS workers. This has since grown to cover a wide variety of employment sectors, with the business now focusing primarily on CIS, PAYE and self-employed individuals. The app not only assists people with their tax returns, but also educates them and ultimately ensures they’re claiming what’s rightfully theirs. Tommy’s Tax has grown to support over 150,000 clients across the UK and have filed 200,000+ returns, helping to claim more than £50 million in tax refunds in just under a decade.
