If you are self-employed, then you need to file a tax return at the end of each tax year to tell HMRC how much you have earned so that they can work out how much income tax you need to pay. Filing your first tax return can be daunting, so whether you run an Etsy shop or make money from your blog, here are some helpful tips to get you started.
Have you registered with HMRC?
If you haven’t done so already, then the first thing that you need to do is to register with HMRC to tell them that you will be submitting a personal tax return online. It’s a straightforward process and only takes a few minutes to complete. You’ll generally receive your activation code in the post after around seven days, so don’t leave it until the last minute.
Start organising your information early.
When you sign up with HMRC, you will be given a unique taxpayers reference number – this is NOT your National Insurance number, and you will need it to file your tax return. Keep a record of your unique taxpayer’s number and your pin somewhere safe, alongside your P60 if you have one from your previous employer as this will also help you out later.
Keep a record of all of your income and your expenses.
Ideally, you will have been keeping a record of all of your business income and expenses from the entire tax year. If you haven’t, then you will need to backtrack, and this can be extremely time-consuming. You must keep a record of all of your income from any source. This includes any wages you have earned from employment outside of your own business.
What expenses can you claim?
If you are working from home, then there are several things that you can claim as a part of your business expenses. These include a portion of, your council tax, your electricity bill, your heating, your rent or mortgage interest and your internet and phone usage. You need to divide these expenses by how much of them you use for your business and how much for your personal use. The gov.uk website has some useful tools to help you do this. In addition to these expenses, you can also claim for your accountancy fees, business-specific insurances, stationary, and any office equipment. Knowing what can and cannot be expenses to your business can take a little while to get your head around, so be sure to make use of the resources on the gov.uk website to make sure that you have claimed everything you are entitled to.
Using an accountancy software
Of course, if you don’t fancy needing to keep track of your accounts yourself, then you may want to use an accountant or an accountancy software such as Sage or Quickbooks. Head over to https://www.mneaccounting.co.uk/sage-accountant/ to learn more about Sage accounting. Using an accountant may be an investment, but it will give you the peace of mind that you have submitted your return correctly and could save you valuable business time.
So there you have it – a quick guide to submitting your first tax return when you work from home – it really isn’t as scary or as confusing as many people think.