Can I file my own tax return ?

Can I file my own accounts with HMRC?  This is a general outline of who files tax returns, and what forms you file.

Short Answer: Yes.   

But - If you are going to do your own tax return do the following:

 Keep good records, no excuses. Both income and expenses are important.

1. Yes, Cash does have to be recorded for both income and if used to purchase materials.
2. Do not put off completing your tax return, the earlier you do it the more likely you are to remember the previous few months and hopefully the accuracy will be better.
3. Get some simple software to help you, current bookkeeping software is easy to use and in some cases free.

First are you a Sole Trader, a Partnership or a Limited Company?

You can choose to file your own accounts, but it is different for Sole Trader, Partnership and Limited Companies.

Sole Traders also known as Self Employed:

1. Let’s talk deadline first: Self assessment tax returns must be completed once a year by either 31 October (for paper returns) or 31 January (online returns)
2. Your tax returns require close attention to the details entered. Whatever information you provide, you must be ready to back up all the numbers, dates and information provided.  Normally years later when you almost definitely won’t remember what you entered in those little boxes.
3. Yes, you will be required to provide things like invoices, statements and receipts if HMRC want to see them.
4. Incorrect information can carry serious financial penalties, the penalties are worse if HMRC find the mistake before you “prompted disclosure”. If you make a mistake and need to fix it in a later year, you will face penalties but they are reduced for an “unprompted disclosure” ie you tell them you made an error.

Partnerships – Definition: Trading in common with a view to a profit”

When do you need to file the Partnership Tax Return?

1. The deadline for filing your partnership business tax return is the same as the Self Assessment – midnight on the 31st January for digital submissions, and 31st October three months earlier for paper returns.
2. Don’t forget that the first period you must report is your start date to 5th April, so make sure you don’t miss the first submission.
3. This tax return will be for the previous tax year. So, for example, you’d file online by 31st January 2022 for the 2020/21 tax year.
4. If you miss that submission date, there’s an immediate £100 fine for each member of the partnership. Subsequent penalties accrue just like those for a late Self Assessment tax return. They affect the partners individually – you are not charged as a whole.
5. Further charges apply for any missed payment.

Everything for the Sole Traders applies but you need to do a bit more work, firstly one partner has to be the Nominated partner to handle the responsibility of filing the partnership tax return (SA800)

1. Do not forget you need to file the Partnership Return with HMRC. (This is the biggest mistake we see by partners)
2. There are two Partnership forms a “short” form or a “full” declaration. Dependent upon the trading income being more or less then £85,000
3. The partnership isn’t actually taxed. All the profits from the partnership are deemed shared between the partners and the partners are then taxed on the share of the profits they are allocated.
4. Then each partner needs to complete their own Self Assessment (SA100), this is where it is like the Sole Trader.
5. Each partner needs to complete a page SA104 to show the individual’s share of the partnership declared income.

Limited Company Accounts

1.  Company accounts include full (statutory) annual accounts and your company tax return.

2.  The accounts must be prepared at the end of your company's financial year and sent to any shareholders, Companies House, and HMRC as part of your tax return.

3.   Normally, the time allowed for delivering accounts to Companies House for a private company is nine months from your accounting reference date (ARD). Your ARD refers to the end of your financial year.

What Period Do The Accounts Cover?

When you form your company, your financial year starts on the day of incorporation and your first accounting reference date will be a year later, on the last day of the month you incorporated. Your ARD will then be on this date every year. For example, if you incorporated your company on the 6 July 2019, your first ARD will be on the 31 July 2020, and then 31 July every year.

As you deliver company accounts nine months after your ARD, this means your first company accounts aren’t due until 21 months after the date you registered with Companies House (your first financial year, plus nine months).

How to prepare company accounts for a small company

Statutory accounts include a:

1. Balance sheet, which shows the value of everything the company owns, owes and is owed
2. Profit and loss account, which shows the company’s sales, running costs, and any profit or loss made over the financial year

Notes about the accounts – these show how your numbers are compiled

Depending on the size of your business, you may also have to include a director’s report and an auditor’s report so first ascertain the size of your business.

If the government counts your business as a small company or a micro-entity, you might be able to send simpler ‘abridged’ accounts to Companies House and not need to be audited.

So where does your company fall:

Small – at least two of the following :

1. a turnover of £10.2 million or less
2. £5.1 million or less on its balance sheet
3. 50 employees or fewer

A micro-entity if it has at least two of the following - :

1. a turnover of £632,000 or less
2. £316,000 or less on its balance sheet
3. 10 employees or fewer

Small businesses and micro-entities can use an exemption so that their accounts don’t need to be audited, and can choose whether to send a copy of the director’s report and profit and loss account. The balance sheet can be simpler.

Micro-entities can prepare simpler accounts that just meet statutory minimum requirements, and send only their balance sheet to Companies House.

Statutory accounts need to meet accounting standards, either:

International Financial Reporting Standards

New UK Generally Accepted Accounting Practice

How to file company accounts

There’s lots of accounting software available, which you can use to prepare and file your annual accounts.

Or, if you’re a small company or a micro-entity you can use several on line cloud solutions to file with Companies House and HMRC. Although the 3rd party solutions are normally more intuitive in our experience.

When it comes to the company tax return, you have to file online. You can only use the paper form CT600 if you have a reasonable excuse for not being able to file online. 

Can I prepare my own limited company accounts?

You can choose to do your own accounting for your limited company, including preparing and filing your annual accounts but remember to give yourself time to research all the intricacies.

However, most limited companies hire an accountant to manage their finances. A limited company’s structure and obligations are more complex than sole trader. Often this means it can be difficult to do everything yourself. There are severe penalties if you make a mistake.

If you do make a mistake, do not leave it.  Fix it and if necessary you need to advise HMRC of any mistakes to minimize any penalties.

However, it’s important to understand that even if you use an accountant, company directors are still the ones who are legally responsible for making sure accounts are accurate.

There are penalties for filing your report late, ranging from £150 for filing under a month late, to £1,500 for filing more than six months late.