The Self Assessment Checklist

Transcription

1 The Self Assessment Checklist for directors of limited companies SELF ASSESSMENT November 2015 Made with love by

2 Your steps to a stress-free Self Assessment journey This guide is designed for anyone who is a director of a limited company. Not sure that you ve got everything covered in your Self Assessment tax return? FreeAgent s Chief Accountant, Emily Coltman, has developed a series of checklists that guide you through the key topics for Self Assessment to help you stay on top of things. About the author Emily Coltman FCA is FreeAgent s Chief Accountant and she is passionate about translating accounting-speak into plain English! A graduate of the University of Cambridge, Emily has been working with small businesses since the year 2000 and is dedicated to helping their owners lose their fear of the numbers and the taxman. She is the author of three e-books: Refreshingly Simple Finance for Small Business, Micro Multinationals, and Very Awkward Tax. Created by This guide was created by FreeAgent, who provide an online accounting system designed especially for small businesses and freelancers. With FreeAgent you can manage expenses and track time, send professionally designed invoices, automatically chase payment, forecast tax commitments, freeagent.com. Try for free at freeagent.com Self Assessment Checklist: 2

3 1. Getting started and getting registered Self Assessment is HMRC s method of collecting tax from self-employed people and company directors in the UK. Every year, business owners must file a return outlining their income from the previous tax year, and pay any tax that they owe. Here are the key dates for Self Assessment for this tax return: Self Assessment tax year return for 6 th April th April st October st January 2016 Are you registered as a director of a limited company with Companies House? Yes No Were you a company director at any point during the period between 6 th April th April 2015? Yes No If you ticked yes for both questions and don t meet the exceptions below, you st Exceptions charity, and the charity s not paying you any money you re a director of a dormant company Handy facts It takes 7 business days for your online tax return registration to arrive, so do it now! Try for free at freeagent.com Self Assessment Checklist: 3

4 from the company in the form of salary and dividends. The company must also What registration do I need to do? If you have a Government Gateway ID from previous years tax returns, you are all set! You can skip this section of the guide. If you don t have this ID or don t know what it is, read on: return. You need to download, complete, print and post them a form. 1 Once you ve done that, HMRC will send you a letter that contains your 10-digit Unique Tax Reference, or UTR - and when you have that, you can register via 2 return? 12-digit user ID, which is also called your Government Gateway ID. Keep this safe. Rather than writing it on a piece of paper which might get lost, consider saving it in a password system like 1Password. You choose the password to accompany this ID when you register for it. HMRC then sends you an activation PIN in the post, which takes at least 7 days to arrive, and once that arrives, you need to log in using your Government Gateway ID and password, and key in the activation PIN. Related Links Try for free at freeagent.com Self Assessment Checklist: 4

5 for the 6 th April th April 2015 period. You have registered with HMRC for Self Assessment. You have a Government Gateway ID or have registered for one. Try for free at freeagent.com Self Assessment Checklist: 5

6 2. Your income What income should I include in my tax return? As the director of a limited company, the company might pay you one or both of two kinds of income that you have to put on your own Self Assessment tax return: Your salary Any dividends on your shares If the company s paying you back money that you lent it (that is, you re taking money from your director s loan account), then as long as you don t take out more than you were owed, there are no tax consequences and you don t have to put that money on your tax return. The company might also pay you back if you spent your own money on company costs - or in other words, if you incurred out-of-pocket expenses. We ll look at that in the next step. Salary If you re the director of a company, it can pay you a salary as an employee, as long as the company has registered with HMRC as an employer. We ll assume here that it has. You re taxed on salary that was due to you in the tax year, whether or not the company actually paid it to you. Dividends If you own shares in a company, then it can pay you dividends as long as it has FreeAgent Knowledge Base: If you took money out of the company to pay yourself any dividends between 6 th April 2014 and 5 th April 2015 you should include these dividends. This assumes that you hadn t already been taxed on these dividends last year. If the company declared a dividend between 6 th April 2014 and 5 th April 2015 that hadn t been paid by 5 th April, you still need to post that into your 2014/15 tax return. Handy facts 1. Include the salary due to you between 6 th April 2014 and 5 th April Also include any dividends that were declared between those dates. Try for free at freeagent.com Self Assessment Checklist: 6

7 You know how much salary was due to you between 6 th April 2014 and 5 th April You ve added up your dividends. You have an easily-accessible record of both your salary income and dividend income. Try for free at freeagent.com Self Assessment Checklist: 7

8 report? When you re the director and shareholder of a limited company, you re not self-employed - the company is your employer and you are an employee. That means that you have to report on your tax return not only your salary and dividends that the company is due to pay you during the tax year, but also any expenses that the company has reimbursed you for. You also have to report medical insurance, or a company car. Your P60 from your employer in the year Your P11D from your employer in the year or were paid back for expenses that you incurred of the Employment section of your tax return. If you have received any expense reimbursements from the company, then This helps make sure that even if your employer hasn t paid you back for all your expenses incurred, you, as an individual, don t miss out on any tax relief you re entitled to. Handy facts 1. You should report any expenses that your employer has reimbursed you for. 2. like a company car. Try for free at freeagent.com Self Assessment Checklist: 8

9 What should I watch out for when claiming expenses? Be careful with expenses, because if the company pays you back for expenses or, in future, treated and taxed as part of your salary. Here are some potential pitfalls in this area: Travelling expenses You can only claim the cost of business travel, not private travel. One common trap is that travel between home and a permanent workplace, which in very simple terms is somewhere you expect to spend 40% or more of your working time for more than 24 months, does not count as business travel! that goes in box 15 of your tax return, or it might need to be added to your salary and taxed that way. For more details about distinguishing between the two, please refer to the HMRC website. 1 Company vehicle and fuel If your company provides you with a company car or van, and fuel for that Remember that what counts is whether the car or van was available for private use, not whether you actually used it privately. There is a case where an employee broke his leg and couldn t drive, but HMRC held that his company Mileage allowance for travel in your own vehicle If you travel on business in your own vehicle (car, van, motorcycle or bicycle), then the company can pay you for mileage at HMRC s approved rates 2 and you don t have to put that on your P11D or on your tax return. If the company pays you less than the approved rates, enter the amount you received had you been paid the approved rates - and put that in as part of your what you were paid and what HMRC allows you to be paid for mileage. If the company pays you more than the approved rates, that ll show on your P11D and Related Links Try for free at freeagent.com Self Assessment Checklist: 9

10 What should I watch out for when claiming expenses? (continued) Business use of home If you carry out your billable work at home, then the company can pay you back up to 4 per week without HMRC requiring you to show any receipts. This amount should reimburse you for the extra variable household costs you ve incurred as a result of working at home. If the business proportion of your variable costs comes to more than 4 a week, you can claim this higher amount instead, but you will need to show receipts for these costs. For more information on how to calculate the business proportion of your variable costs, take a look at our infographic. 1 Unfortunately, you cannot claim for any worked from home. For more guidance on claiming expenses for business use of home, please refer to the HMRC website. 2 Variable costs: costs that change depending on how much you work at home, such as gas or electricity Fixed costs: costs that always stay the same regardless of whether you work at home, such as rent or council tax Reporting business use of home expenses: 1. Work out the amount that you can reclaim (refer to the HMRC website for further details 2 ). 2. Include the total amount from step 1 in boxes 16 and 20 in the Employment section of your tax return. Once you ve completed these steps, you re ready to move on to the next one, which is collecting information about your other income. See you there! Related Links Try for free at freeagent.com Self Assessment Checklist: 10

11 You have reported any relevant benefits. You have reviewed whether you can include business use of home, and if so, you have worked Try for free at freeagent.com Self Assessment Checklist: 11

12 4. Other income Your Self Assessment tax return has other sections apart from the Employment section - these cover areas like your basic information, selfemployment income, rental income, and so on. This section will walk you through the common types of other income that you should consider. What other income do I need to declare? Employment income from another job Do you have another job where you re paid a salary? If so, you ll need your form P60 from your employment for the year You ll need to open a new marked with an asterisk. Ignore the National Insurance because this doesn t go on your tax return. If you ve also received any benefits or any money from a second employer as well as your salary (including any expenses you incurred and were paid back for), your employer will also have given you a form P11D for the year tax return too. Forms you ll need: Your P60 from your second employer in the year Your P11D from your second employer in the year or were paid back for expenses that you incurred. You ll use the information from these two forms in the second Employment return. For your P11D, the box numbers you should use on your tax return are shown in brown or blue. You ll also need to have a note of any expenses you actually incurred when doing your job, but which you weren t paid back for; the P11D only shows expenses that your employer paid you back for. Handy facts 1. P60 and P11D in your tax return. 2. Bank interest goes in the main section of your tax return. 3. Other than shares in your own company, include any dividends that you have received on shares during the tax year. Try for free at freeagent.com Self Assessment Checklist: 12

13 Bank interest and taxes each of your accounts and how much tax you ve paid on that interest. Collect bank interest and tax information from: Personal accounts owned just by you Personal joint accounts - take half the interest and tax for joint accounts Don t include: ISAs - they are already tax-free Interest on the limited company s bank account(s). This will go on the company s own Corporation Tax return. If you have a bank account with Santander (formerly Abbey), this means you ve received Spanish interest. But if your foreign interest level is below 2,000 and you have no other foreign income, you don t have to put this as foreign bank page on your tax return). Instead, it can go in with your UK bank interest in the same box. Add up all the interest (taking half of the interest received on any joint accounts), and all the tax (again take 50% of the tax on interest on joint Shares, dividends, and other income Finally, add up any other income that you have received. Here s a list of common types of other income to consider: Dividends on any shares you own in companies other than yours - count any dividends received between 6 th April 2014 and 5 th April If you own any shares in foreign companies, you can put any dividends received on those shares in this section, provided that the total of those dividends amounted to 300 or less. If your foreign dividends amounted to more than 300 you Income from a trust Try for free at freeagent.com Self Assessment Checklist: 13

14 If you have a second job, have your employment forms P60 and P11D to hand. bank accounts, apart from the limited company s business account(s). Add up any other income that you may have, Try for free at freeagent.com Self Assessment Checklist: 14

15 5. Filing There are many ways to file your Self Assessment tax return. Most limited company directors can file their tax returns directly to HMRC either through FreeAgent or HMRC s free portal. Here s some additional information about each of these options: Web-based software Supports all pages of the Self Assessment tax return. All pages must be completed manually Web-based software (works on both mobile and desktop) Supports the Main Return, Employment and Tax Adjustments pages FreeAgent can complete up to 30% of your Self Assessment form using your bookkeeping data Your full name and address Your National Insurance number Your 10-digit Unique Tax Reference* Your date of birth Your HRMC login * This is issued by HMRC and can be found on documents it sends such as a Notice to Complete a Tax Return. Make sure you use your own individual UTR, not the company s. HMRC online using the logon ID and password you registered with, and keep st January busy right at the end of January, and this isn t an acceptable excuse for late have paid your tax in full. Try for free at freeagent.com Self Assessment Checklist: 15

16 Handy facts st 1. January in the last few days of January. 3. How do I pay my tax? Avoid interest and penalties by paying your tax and National Insurance by 31 st January If your tax and NI bill is over 1,000, you may also have to make a payment on account on 31 st July More details about payments on account are available on the FreeAgent blog. 1 Your tax return software or HMRC s online portal will tell you how much you pay separately by bank transfer or another means. HMRC s payment and bank account information is available online. 2 When you pay, make sure to use your Related Links Try for free at freeagent.com Self Assessment Checklist: 16

17 commercial package (such as FreeAgent) or HMRC s own website. Have everything in your other information checklist ready. Be ready to pay your tax and National Insurance to HMRC. File! Give yourself a pat on the back! Try for free at freeagent.com Self Assessment Checklist: 17

18 Self Assessment, sorted Detailed tax breakdown shows exactly how your tax liability is calculated. Tax timeline shows dates for Self Assessment payments and how much is due. Supports the Main Return, Employment and Tax Adjustments pages. Can automatically complete up to 30% of your Self Assessment tax return. Built-in support helps you understand and complete the form. Most limited company directors can file their return directly to HMRC. What else can you do with FreeAgent? Send professionally designed invoices and estimates. You can even set invoices to chase payment themselves! Automatically import transactions from your bank account. To save even more time, FreeAgent automatically recognises and reconciles similar transactions. Manage your expenses wherever you are. Track costs and expenses easily and record out-of-pocket expenses, even on the go. Create monthly payslips for employees. Submit RTI directly to HMRC when you run your payroll. freeagent.com Try for free at freeagent.com Self Assessment Checklist: 18