Self Assessment. 2007 -2008

PAYE or DIY?
When you work as an employee for someone else, your tax is usually dealt with by them under Pay As You Earn – they work it out, take it off your pay before you see it, and send it to HM Revenue & Customs.  Most employees don’t have to fill in a tax return or deal directly with the taxman.

All that changes if you start up your own business or if you acquire a source of income on which the tax isn’t paid before you receive it – that’s how most small savers pay their tax on interest and dividends, if you receive rent, you have to pay the tax on that yourself.

When you enter the world of “self assessment” (SA) – the name implies that you can do it yourself, but it’s not easy.  Many people use a professional to reduce the pain of dealing with the paperwork and to make sure you claim all your allowances etc;The self assessment can be a daunting document, with hundreds of boxes for different types of income – interest, dividends, salary, business profits, rent and so on – and deductions such as pension contributions, gifts to charity and business expenses.

Where do I begin?
Contact us to register your business.We will complete all the necessary paperwork for the Inland Revenue and check your eligibility for any grant assistance at the same time.
You have to register:-

Once registered with us we will take care of your self assessment forms and all other documentation such as working tax credits, V.A.T. and P.A.Y.E.

Ifyou don't register with us or you miss these deadlines, HMRC may charge you a penalty – or you may simply fail to pay your tax on time, in which case you will pay interest.

Example

Jill starts a business on 10 January 2007.  She needs to tell HMRC by 10 April 2007.

Steve buys a buy-to-let property with a sitting tenant on 10 January 2007.  If he doesn’t already fill in a tax return, he needs to ask for one by 5 October 2007.

Once you are in the SA system, you will be sent a tax return each year, usually shortly after 5 April.  You have to complete it and return it no later than 31 January after the year end (e.g. 31 January 2008 for the tax year to 5 April 2007).

Paying up
For the first year of SA, you have to pay the outstanding tax on 31 January (even if you send in the return earlier).  For later years, you make “payments on account” (POA) of half the previous year’s SA tax on 31 January and 31 July, with the balance due on 31 January following:

Example
Philip has to fill in a SA tax return for the first time for 2006/07.  He has a total tax liability of £10,000, of which he has already paid £3,000 under PAYE and by deduction on interest.

He will have to pay:

On 31 January 2009, he will settle up the SA tax for 2007/08 and pay a POA for 2008/09.

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