A quick guide to self-employed sole trader tax
If you are self-employed as a sole trader, then you must complete a self-employed tax return at the end of each year (6 April to 5 April) if:
- You earned more than £1,000
- You are a partner in a business
How to complete your self-employed tax return
Sole trader tax returns can be submitted to HMRC online, so it’s important you register with them before you do anything else, so that you can access their online service.
Once your registration has been processed, HMRC will provide you with a 10-digital Unique Tax Reference (UTR), which you need to type in before you can submit your returns. You will also need to activate your account using the code HMRC sends you in the post.
Registering with HMRC
There are two different options for registering, depending on if you’ve already submitted a return:
1. If you need to complete a self-employed tax return for the first time – then you need to register for self-assessment and Class 2 National Insurance.
2. If you’ve sent a return online before – you need to complete form CWF1 to re-register.
Please note – if you’re planning to file a tax return for the 2018-19 tax year, you have until October 5, 2019 to complete form CWF1 to avoid receiving a late registration penalty.
What happens next?
If you’ve completed a CWF1 form, you will receive a letter from HMRC around six to eight weeks later, asking you to prepare your tax return.
If you’ve followed our advice and registered, then you’ll have everything you need to file your tax return online. Alternatively, you can use commercial software or paper forms.
Whichever method you choose, it is essential your returns are complete, accurate and submitted on time. Failure to comply with these requirements can result in you being penalised by HMRC.
How to stay on top of your self-employed tax return obligations
Tax can be complex to calculate and keep tabs on, which is why so many self-employed workers (foster carers included) choose to enlist the expertise of an accountant to a) make sure they submit their return correctly and on time and b) minimise the risk of being fined.
Why appoint an accountant?
Using an accountant provides you with peace of mind that your tax affairs are all taken care of. In our experience, many of our foster carer customers find they:
- No longer have to worry about making errors due to changes in tax legislation – HMRC imposes flat rate and tax-related penalties if taxpayers have underpaid tax. These penalties apply even if a mistake is made innocently and in good faith
- Have clarity on how much tax they’re paying – thanks to our insight, they can take advantage of any opportunities to reduce, or even, totally cancel their tax bill
What’s more, they can benefit from our expert advice without any nasty surprises, as we offer a flat-rate fee service.