Mythbusting and a case study – HMRC’s expert guidance on filling in your tax return

Heather O’Connell who runs Bluebird Works

This article has been exclusively written and provided by HMRC for SME Magazine

With less than three months to go file your 2021 to 2022 tax return, HM Revenue and Customs is encouraging new and established small businesses to get ahead of the game and start their Self Assessment early. The deadline to submit your return and pay any tax due is 31 January 2023. The sooner you complete it, the sooner you can budget to pay any tax owed,  or if a repayment is due, it can be claimed back sooner.

If you haven’t started your Self Assessment yet and need some inspiration, Heather O’Connell, a small business owner from North London, shares her top tips on how she prepares to complete her tax return.

The experts at HMRC have also bust some myths and provided some little-known facts about the process that 12.3 million customers complete each year and which  collects £33 billion in taxes to keep the country moving.

Case study

Heather O’Connell runs Bluebird Works, a coaching and training business based in North London.

She says: “I have 30 years’ experience working in the publishing industry and now provide consultancy, training and business/personal coaching. I’ve been doing Self Assessment for 11 years. While my income fluctuates year on year, my business is relatively straightforward and not too complex. I use an accountant to help with my tax return. I once had an accountant who made a mistake which meant I had a huge tax bill. This terrified me and I promised myself that I would be organised so it would never happen again.

“I like order and I am quite organised. I do my books once a month and I put some of my income into a savings account to help me pay my tax bill when it arrives. I do a deal with myself that I can’t do my billing until I’ve done my books, and if I don’t do my books then I can’t pay the mortgage. I complete an Excel spreadsheet each month (supplied by my accountant) and I send it to them in April, shortly after the tax year ends. Once it’s submitted, I can relax. I find out how much I have to pay in May or June which means I can budget properly and pay my tax bill by the deadline on 31 January.

“I now have a new accountant to process my tax return because it’s quicker and easier than if I do it myself. Using an accountant also means I don’t get any terrible surprises as I’m less likely to get it wrong – I don’t want to owe HMRC too much money.

“While I get all the reminder messages from HMRC I’m confident that I’m organised and I have a system that works for me. I like to get it done and dusted and avoid the fear that something could go wrong. My top tips for other small businesses would be to do it early, be organised – it takes so much stress out of it. Set aside time each month and save a bit of money every month so it also makes paying your tax less stressful.”

 Myth 1: The Self Assessment process is hard work.

Mythbuster: It doesn’t have to be if you’re organised and have the documents you need. New businesses can visit GOV.UK to get started and access lots of advice to guide you through the Self Assessment process and meet your obligations. You can also check which documents you need on GOV.UK.

To make it even simpler, you can now get your Unique Taxpayer Reference (UTR) as well as other information, including employment history, securely, via the HMRC App, which can be downloaded from App Store for iPhone or Google Play for Android.

There’s plenty of help and guidance online – there are a series of videos on YouTube and updated Self Assessment guide to help you complete your tax return. Also, if you no longer need to complete a tax return then it’s important you tell HMRC otherwise they will keep sending you information and will think you’re late with your tax return and may issue a penalty. Find out how do this this on GOV.UK

Did you know that before the Self Assessment system was introduced 26 years ago, HMRC was responsible for calculating the amount of tax a business owed by making an assessment of turnover. It was then up to the businesses to accept the assessment and pay the tax owed or appeal against it. The process was manual, time consuming and extremely labour-intensive.

Myth 2: Online filing takes too long

Mythbuster: Online filing is the simplest and quickest way to submit your tax return. Last year, more than 95% of customers completed their tax returns online. Online filing also means you can start your tax return and go back to it as many times as you need to before submitting.

Did you know that the first internet filing system for Self Assessment began on 3 July 2000 with 38,000 customers successfully filing their tax return digitally by the deadline of 31 January 2001. Now over 95% of Self Assessment customers file online with only a small number continuing to fill in a paper return.

Myth 3:  I have until 31 January so I can leave it until the last minute

Mythbuster: HMRC is encouraging Self Assessment customers to get ahead of the game and be organised, file early so you know what you owe and can budget. Even if you complete your tax return now, you still have until 31 January 2023 to pay your tax. You really don’t want to be caught out with last minute or unexpected emergencies, or to rush and possibly miss the deadline and risk a penalty.

Did you know that while the busiest filing day and hour is traditionally 31 January between 4-5pm, more than 66,000 Self Assessment customers chose to file their tax return on 6 April 2022, the first day of the tax year. These organised early birds know what they owe and are budgeting ready to pay their bill by the deadline.

Myth 4: I have to pay my tax bill in full, right?

Mythbuster fact: No. This is another reason to file early. If you are unable to pay your tax bill in full by the deadline, HMRC may be able to help by arranging an affordable monthly payment plan. If you are worried about paying your tax bill you can access a full list of payment options and eligibility criteria on GOV.UK.

Did you know that since 6 April 2022 almost 21,600 Self Assessment customers, who were unable to pay their tax bill in full, have set up a payment plan to spread the cost into manageable monthly instalments. Last year, in the 12 months to 5 April 2022, almost 142,000 customers chose to use self-serve Time to Pay to pay any tax owed for the 2020 to 2021 tax year, spreading the cost of around £475 million into monthly instalments.

Myth 5: I’d get a text or phone call from HMRC if I haven’t paid the right amount of tax or if I’m due a refund, wouldn’t I?

Mythbuster fact: Anyone contacted by someone claiming to be from HMRC in a way that arouses suspicion is advised to take their time and check the scams advice on GOV.UK. Customers can forward suspicious texts claiming to be from HMRC to 60599 and emails to [email protected]. Any tax scam phone calls can be reported to HMRC using the online form on GOV.UK.

Did you know that HMRC has a dedicated Customer Protection Team and in the 12 months to October 2022 responded to more than 182,789 reports from the public of suspicious contact, of which more than 80,118 were scams offering fake tax rebates?