As if you didn’t have enough on your plate already, the annual chore of filling out a self-assessment tax return can be enough to drive you right round the bend. Simply figuring out if and when you need to get that seemingly never-ending form completed can be enough of a pain as it is, without the added complications of calculating your expenses and working out exactly what you owe Mr Tax Man.
But, fear not dear tradesman – help is at hand.
Here, we’ve pulled together this comprehensive guide to self-assessments, containing everything you need to know about completing your tax return.
How do I know if I need to complete a self-assessment?
As a tradesman, you’ll need to fill out a tax return if you’re considered self-employed. Typically, that means you’re responsible for finding customers and deciding when and how to carry out the work for them, rather than being told where to go and what to do by an employer.
HMRC considers you to be self-employed if:
- You call the shots about how you work
- You’re responsible for covering losses as well as generating profits
- You have the authority to hire a sub-contractor or employee to work for you on your terms
- You take responsibility for completing unsatisfactory work on your time and out of your own pocket
This generally applies to most tradesmen, though if you’re a company director or you get your work through an agency, different rules do apply. Thankfully, HMRC provides a helpful tool that you can use to determine whether you need to fill out a self-assessment. You can use this tool on the gov.uk website.
How do I register for self-assessment?
Once you’re sure you need to send in a tax return, your first step is to register for self-assessment. The good news is that this is much simpler than it used to be.
You can register online via gov.uk. The whole process takes a few minutes, after which you’ll be sent a letter containing your 10-digit Unique Taxpayer Reference (UTR). You’ll need this when you first log in to your account to complete your return.
Do I have to complete my tax return online?
Last year, the government announced plans to make filling out tax returns a digital-only process, meaning you couldn’t use the old paper forms. Then, a pesky little thing called Brexit got in the way, and those plans were put on hold.
The upshot is that whilst you can still complete a paper tax return if you really want to, there may come a time when that’s no longer an option. That being said, completing a self-assessment online is usually much quicker and simpler. Plus, it saves on chopping down trees, which is always a bonus.
What do I need to complete my tax return?
Basically, you’ll need all the information you’ve got about your earnings during the tax year and any expenses you incurred which you want to deduct from your tax bill. For earnings, this might mean that you keep invoices, bank statements, or other documents that detail money you received for work completed. For expenses, this might be bills, receipts and account statements.
Whilst these all serve as evidence and can help you calculate your incomings and outgoings, you might find it easier to invest in a bookkeeping app or accounting software for your computer. These make it easier to process income and expenditure as you go along, and some of the latest releases can even be linked to your HMRC account to make filling out your return even easier.
What can I claim as expenses?
Expenses are essentially anything you spend money on that you need in order to run your business or carry out your work effectively. In the trade industry, your biggest expenses are likely to be tools, materials, and travel cost.
Any time you have to buy supplies to carry out a job for a customer, the cost of those supplies counts as an expense. Likewise, any time that you need to replace your equipment or buy a new tool, you can claim that money back against your final tax bill.
For transport, this not only includes fuel, but essential maintenance and repairs if your vehicle is used for work only.
Other things you can claim expenses for include:
- Advertising and marketing – such as business cards, website costs, or flyers
- Clothing – if you need specialist protective clothing, you can add this to your expenses
- Financial costs – such as your public liability insurance and bank charges
- Office and business premises costs – this includes costs of heating, lighting, Internet and telephone charges, as well as stationary
What if I use my home as an office?
If you’re like many sole traders, the chances are that your “office” is really just the dining room table with a good brew and a laptop.
If that’s the case, you can still claim some businesses premises costs, including:
- Council tax
- Internet costs
- Mortgage or rent
- Telephone use
However, keep in mind that you can only claim a percentage of these costs against your tax return. HMRC advises that you come up with a “reasonable method” of determining how much of your typical household running costs are used on business – such as calculating based on the time you spend in your home actually working on your business.
When do I need to submit my tax return?
Tax return deadlines are October 31st for paper tax returns and January 31st for online tax returns.
Finally, having submitted your tax return, you’ll need to pay any tax you owe. Like online returns, the deadline for this is January 31st.
Tradesman Saver also provides insurance for tradesmen covering a wide variety of professions, as well as insurance for self-employed professionals. For further information, please see our Tradesman Insurance or Who We Cover pages.