Making the Most of Your Self-Assessment Tax Return

Making the Most of Your Self-Assessment Tax Return

The self-assessment tax return is something many small business owners in the UK know all too well. If you're a sole trader or partner, it’s a task that comes around every year, and for some, it can feel a bit overwhelming. But don’t worry—getting your tax return right doesn’t have to be stressful. With a little organisation and preparation, you can make sure you’re not only filing your return correctly but also making the most of the allowances and deductions available to you. Here’s how to get started.

1. Get organised early

One of the best ways to make your self-assessment less daunting is to start gathering everything you need early. The deadline for submitting your online tax return is 31 January, but it’s always a good idea to give yourself plenty of time in advance. Here’s what you’ll need to have on hand:

• Income details: Whether you’ve been paid by clients, customers, or any other sources, make sure you have accurate records of all income earned during the tax year.
• Expenses: Keep track of any allowable business expenses—these will reduce your taxable income. Examples include office supplies, business-related travel costs, and professional subscriptions.
• Bank statements: Your statements can be useful for cross-checking your income and expenses.
• Previous tax return: Reviewing last year’s return can help you catch any recurring details or ensure you don’t miss anything.

Starting early will not only save you time but also help you avoid any mistakes or missed information.

2. Maximise your allowable expenses

As a small business owner, one of the biggest advantages of self-assessment is the ability to reduce your taxable income by claiming allowable expenses. Here are some common deductions you should be aware of:

• Office supplies and equipment: Computers, printers, office furniture—anything you use to run your business can often be claimed.
• Travel and vehicle expenses: If you use your vehicle for business purposes, you can claim for fuel, parking, and even a portion of your vehicle’s depreciation.
• Home office costs: If you work from home, you can claim a portion of your household bills (e.g., heating, electricity, broadband) as business expenses.
• Professional services: Fees for accountants, solicitors, or consultants can be deducted, as well as insurance premiums related to your business.
• Training and development: Any costs associated with improving your skills or knowledge that benefit your business are worth claiming.

Make sure you’re capturing every allowable expense. If in doubt, speak to your accountant—they can help you make sure you’re not missing anything.

3. Don’t forget about tax reliefs

There are a number of tax reliefs available to small businesses in the UK that can help reduce your bill even further. Some examples include:

• Research and Development (R&D) Tax Credits: If your business is working on new products, services, or processes, you may be eligible for R&D tax credits. These can reduce your Corporation Tax bill or even lead to a cash payment.
• Marriage Allowance: If you're married and one of you earns below the personal allowance threshold, you may be able to transfer part of your personal allowance to your spouse, reducing the overall tax bill.
• Trading Allowance: If you’re self-employed and earn under £1,000 from a side business, you may not need to report that income. It’s worth checking if you qualify.

Keeping up with the latest reliefs and allowances could make a noticeable difference to your tax return. It’s always worth double-checking that you’re not missing anything that could save you money.

4. Make sure your income is correct

When submitting your self-assessment, it’s essential that your income is reported accurately. This includes any income from freelancing, business activities, and even investments. If you’re using accounting software, like QuickBooks or Xero, make sure all your income entries are up to date and reconciled with your bank statements. If you receive income from multiple sources, it’s crucial to ensure everything is correctly accounted for.

Accuracy is key to avoiding any fines or penalties, and ensuring you’re not paying too much tax.

5. Plan for national Insurance contributions (NICs)

National Insurance Contributions (NICs) are another important part of your tax planning, and they apply to most people who work and earn above certain thresholds. Here’s a breakdown of how NICs work:

• Self-Employed Individuals: If you’re self-employed, you’ll need to pay Class 2 and Class 4 NICs. Class 2 is a flat weekly rate (£3.45 per week for 2024/2025), and Class 4 is based on your profits—9% on profits between £12,570 and £50,270, and 2% on profits above that.
• Employees: If you’re employed, your employer will deduct NICs from your salary. The rates are 12% on income between £12,570 and £50,270, and 2% on income over £50,270.
• People Under 16 or Over State Pension Age: If you're under 16 or over the State Pension age, you don't need to pay NICs. However, if you’re over the State Pension age and still working, NICs may not apply unless you're self-employed.

Make sure you account for NICs in your tax planning, as they can have a significant impact on your final tax bill. If you’re unsure whether you owe NICs or how much to pay, it’s always a good idea to check with HMRC or speak with an accountant.

6. Consider making payments on account

Payments on account are advance payments towards your next year’s tax bill. They’re usually due on 31 January and 31 July, and they’re based on your previous year’s tax return. While they can feel like an extra cost, they help spread out your tax payments over the year rather than having to pay everything at once.

If your income fluctuates from year to year, consider making adjustments to your payments if your profits have dropped—this can help keep your cash flow under control.

7. Take advantage of tax-efficient savings

If you're looking for ways to reduce your tax bill over the longer term, consider putting some of your earnings into a pension scheme. Contributions to pensions are tax-deductible, meaning you can reduce your taxable income while saving for your future. You can also look into other savings options, such as ISAs, which can offer tax-free returns on your savings.

8. Don’t rush the process

It’s tempting to leave your self-assessment to the last minute, but rushing your return increases the risk of errors. Take the time to double-check all your figures, make sure your income and expenses are accurately reported, and review your calculations. If you’re not sure about anything, don’t hesitate to ask for help from an accountant—they’ll be able to guide you through the process and ensure everything is correct.

Your self-assessment tax return doesn’t have to be stressful. By staying organised, maximising your allowable expenses, and keeping up with any tax reliefs, you can ensure your tax return is as efficient and accurate as possible. If you’re ever unsure about anything, it’s always a good idea to get professional advice from an accountant—get in touch with us today by emailing **gary.summons@perkaccounting.co.uk,** and let us help you navigate the complexities and save you time in the long run.