What Should Sole Traders Know About a Self-Assessment Tax Return?

Everyone pays a certain tax after their income crosses a certain level. You have to put in details about the income that you have received in the past year. The related rules are the same for every citizen in Belfast. Many people perceive it as a complicated exercise and avoid filing returns. You must know about your tax obligations as a sole trader. It is equally important for you to know how to reduce your tax efficiency. Guidance from a professional will help you benefit from your business accounts. He will make sure that you are submitting the returns in the right order.

Register with HMRC

Firstly, you should inform the HMRC about your self-employment when starting a sole trader business. It will only apply in the case of a new venture or a side job. You have to pay fines if the registration is not done on time. HMRC suggests registering early for simplified tax returns. Receiving the registration will be a success for your business. The procedure will make it more credible and provide a professional image. It will boost the reputation that you have in the market. You will receive potential customers who will rely on your activities. Therefore, registering with HMRC will be a good start for you. 

Keep Records of Everything

Keep track of every transaction and expense as a business owner. You may not require it for your tax returns, but it will work as a good defence. The process can be helpful when HMRC asks you for proof of your declaration. The system is changing and will enable you to keep digital records. The nature of the tax for sole traders is changing because of the introduction of Making Tax Digital. The government proceeded with this initiative to make tax reporting easier. Self-employed businesses and landlords will have to comply with this law after 6th April 2023. Documenting everything is a necessity for every business person.

Be Mindful of Your Sole Trader Tax Allowance

Your tax allowance is modified in 2021/22. It was £12,500 for two years, but the government raised it to £12,570 on 6th April 2021. This will assure the traders to arrange for a lesser tax return. You may have to pay more taxes if the earning increase over the years. The authorities are freezing all the taxation figures until 2026. It is good information and in line with the simple tax obligation of the self-employed. You will be dealing with comparatively lesser paperwork. The filing options are few because of simple rules and regulations. You can register with HMRC using online methods. 

Stay on Top of Important Key Dates

It will be vital for you to meet all kinds of deadlines. A delay in your tax return will earn you HMRC penalties. These can involve paying a lot of money. You may forget the dates because of your busy timetable. Use a calendar and mark the critical dates. Becoming so particular will make your business successful. It is easy to manage the dates. Use your free time for this purpose. The information about the dates will reduce your stress. A timely return will put you in a good position in the market. Keep a record of important days and see if they coincide with the dates.

Adjust to the New Points-Based System

HMRC is going to put in place a points-based system. According to them, it will make the tax returns more consistent. The government has stated that the new system will penalise those who often fail to meet their tax obligations. However, it will not punish those who do so by mistake. You can learn about it because the practice will come into effect in April 2023. This means you will have plenty of time to educate yourself about it. You will earn a point for every missing deadline. You will get a penalty after a certain number of points.

Conclusion

Every self-employed individual must take care of their tax returns. Hiring an expert will make the work easier. He will remind you of the dates and ensure that the process progresses in the right order. To begin with, you have to register with the HMRC. It will boost your business image in the market. Always remember to update yourselves with the changes taking place in the system. Some of them are the introductions of Making Tax Digital and the new points-based system. The information will keep you at the top of your game.