Now we’ve recovered from the January Self Assessment season, let’s all give ourselves a pat on the back. It looks like this year was tough for many self-employed people and small businesses, with over two million still scrambling to file and pay in the days before the deadline. Not to mention the 750,000 or so who missed the deadline and are facing a fine and interest charges.
So why do people still struggle to file on time? HMRC are very good at reminding people through adverts, emails, letters and even texts. If you have an accountant, they should be informing you of the benefits of filing early to avoid last-minute panic, too. It can’t be that it’s just quite dull, can it?
Note: If you’d rather download a guide to read later, check out the jargon-free PDF Self Assessment guide below.
This is fine, everything is fine
There are things that can go wrong when you’re doing your online Self Assessment which contribute to the last-minute filing panic, or even to missing the deadline altogether.
It will cost you time for things like forgetting your password, losing your Unique Taxpayer Reference (UTR), or misplacing your Government Gateway ID. You shouldn’t underestimate the delays that this can cause, from up to two hours for messing up your password to ten or more days if you need to completely restart the registration process.
If you need any extra help, such as being reminded of your UTR (this should be on any correspondence you’ve had previously from HMRC), the wait for getting through to HMRC’s phone support can differ dramatically depending on the time of year that you’re contacting them. If you’re ringing in the last week of January, you’re probably going to be listening to muzak while you wait on hold for quite some time.
Obviously, these strict security features are designed to keep your private details safe but they can make for a very frustrating user experience if you’ve left things to the last minute.
Top tips from our client managers
Our client managers are our secret weapon at Crunch – they deal with HMRC and Companies House on behalf of our clients, taking the edge off some of the frustrating elements and saving time and energy that could be spent on actually running your business!
Over the last few months of 2017 and the whole of January, client managers were busy reminding people of upcoming deadlines and things they needed to do to make it easy for them to keep on top of their Self Assessments.
Since they’re experts in keeping organised and on top of deadlines, we wanted to know what advice they could give the self-employed and company directors, so they can start the tax year positively and make next year’s Self Assessment as painless as possible.
“Keep your business bank accounts reconciled”
If you’re a limited company director, bank reconciliation means that you have evidence that the money coming into your business bank account matches with the money leaving, so your accounts are balanced. Reconciling your bank accounts each month, either manually in a spreadsheet or in cloud accounting software like Crunch, is the most important advice we can give..
Falling behind can cause issues with being able to get bank statements easily, as some may only hold the last three months online. Without constantly reconciling your accounts, it’s impossible to accurately know your company profits. If you’re paying yourself through salary and dividends, you won’t be able to be certain that there was ever enough profit in the company. This means that the dividend could be illegal and lead to problems with the taxman.
Also, you won’t be able to get an accountant to do your Self Assessment if the reconciliation hasn’t been completed up to the end of the tax year. The money coming in and going out of your company needs to be accurate on each and every occasion.
“Use a personal tax estimator”
A good way of staying organised at the start of the tax year is understanding what your tax liabilities will be, keeping you on top of your bookkeeping. Using a personal tax estimator to work out what your earnings are after you’ve paid income tax, National Insurance and expenses puts you on the road to understanding your accounts in no time.
“Invest in cloud accounting software”
The accounting world is embracing technology as a way of streamlining bookkeeping, making it both ultra-efficient and stress-free.
Cloud accounting software like ours is great because it’s super fast and information can be shared more readily, from client to accountant and vice versa. You’re not waiting for Snail Mail as documents can be uploaded into the app or emailed across in seconds, not weeks.
You can use an app to scan and upload expenses, log mileage and other great time-saving features to keep on top of your finances.
When it comes to next year’s Self Assessment, using cloud accounting software will help you because everything is stored in one place. You’ll never need to worry about losing your receipts, P60s, P11Ds, and everything else you’ll need to complete your Self Assessment.
“Think about saving money from your earnings for tax”
Always be aware that you’ll need to pay tax on what you make from self-employment. Knowing how much you’ll need to save from your earnings each month to put away for the taxman is a tricky area, since it really depends on an individual’s situation, what type of income they have coming in and what type of company structure they’ve chosen.
The most important thing to remember is that if you’re a limited company, the money isn’t yours; it’s the company’s, and you need to be careful how you take it. If you’re a sole trader, you mustn’t forget that you need to allow for tax, National Insurance and to make a payment on account.
That last one can be a real sting in the tail, especially for newly self-employed who may not realise or understand they’ll have to make a payment on account for the next tax year as well as pay what is due for this year. You can find out more about payment on account in our article.
“Submit early – or as soon as you have the information you need”
Filing and submitting early means won’t be in such a panic to get all the information you need. You can submit your Self Assessment as soon as the tax year ends, so why not get ahead? If you need any support, HMRC shouldn’t be as busy, and you’ll know how much your tax bill is going to be well in advance, giving you time to save for it if you haven’t already. Best of all you can concentrate on more exciting things like growing your business!
“Write down your questions for HMRC before you make the call”
Just the thought of making a call to HMRC can leave some of us in a cold sweat. Over the years, HMRC has been criticised heavily for their waiting times on their phone lines. In 2015 it was reported that the average wait on hold was 47 minutes. They’ve made improvements over the last few years, but these negative stories are worth remembering – especially if you were one of the unlucky ones.
But just because it’s not the most user-friendly helpline doesn’t mean you shouldn’t bother. Our client managers suggest never putting it off.
When making the call, it’s good to be prepared and write down your queries in advance. Have your address, National Insurance details, any financial documents you think you might need and UTR to hand because, without them, you’ll only have generic answers. If you think your tax code might be wrong, find a recent payslip.
“Let HMRC know if you’re having problems”
If you’re not organised with your finances, you may struggle to find the money for your next tax bill. You need to be aware that you’re no longer able to use a personal credit card to pay your taxes.
If you realise you might struggle with paying for your next Self Assessment, contact HMRC as soon as possible – they might be able to set up monthly payments which are a great way to stay on top of your finances.
“Sole traders need business bank accounts too”
If you’re a sole trader and you want to make the next Self Assessment as pain-free as possible, get a separate business bank account. Why? Because it makes managing your finances and reconciling your accounts so much easier. It gives you a much clearer picture of your business finances and can be used to keep the money back that you’ll need to pay HMRC. You can then pay yourself from that account.
“Look after your passwords”
When the time comes to do your Self Assessment, you’ll need to enter several different passwords, UTR numbers and gateway passcodes. If you’re prone to forgetting passwords, like many of us, you’ll want to find a way of storing them. Using a software like LastPass keeps your passwords securely locked online. Alternatively, you could write them down in one place and lock this away with other important documents. Never, ever share your passwords with anyone.
“Get an accountant!”
Getting an accountant is vital to helping you with your Self Assessments, year after year. They’ll remind you of tax dates and payments due, show you ways of keeping your accounts in excellent shape, and advise you on allowable expenses and how to report them so you’re as tax efficient as possible.
They can help you with things like estimating how much tax and NI you’ll need to pay every six months, or quarterly for VAT. They’ll also help to ensure you’re not forgetting any payment on account, which catches many people out every year.
“You can submit your Self Assessment with estimates”
What many freelance and self-employed people don’t realise is that if you’re still searching for some information for your Self Assessment, you could submit using estimated figures as the last resort. Although it’s far from ideal, you can then go back to HMRC at a later date and update your return with the additional information when you have it. Don’t tell them any old excuse; submit what you have already, pay the amount HMRC advise, then seek help and advice from an accountant on how to complete the rest of it. This will save you from easily avoidable fines.
If you are considering this as an option, please remember that HMRC takes a dim view of deliberately giving incorrect information. Make sure you don’t underestimate your earnings or over-estimate your expenses. You may end up paying a fine and interest if HMRC decides that your estimates meant that you deliberately paid less tax than you should have.
So, did you leave your Self Assessment until the last minute this year? If so, remember that feeling and keep these tips from our client manager’s in mind. Not only will you save yourself from that horrible gut-wrenching feeling coming back over the last few months of this year, but you can save time and energy, giving you the chance to concentrate on growing your business.
Download our no-nonsense guide to Self Assessments and get in the know.