With every passing day of January, all the self-employed people are nearing their self-assessment tax return deadline which is 31 January. For locum doctors, including locum GPs, this is the time of added work of getting the paper work sorted and finances managed. Locum doctors often need to file self assessment tax returns due to the nature of locum work and the variety of ways they can be paid, whether as a sole trader, through a limited company, or as an employee. This means you may have income received from multiple sources, including untaxed income, dividends, or payments from an employer or agency. Understanding your responsibilities for UK tax, income tax, national insurance, and corporation tax is essential, as missing the filing deadline can result in penalties from HM Revenue. So, to make the process smoother, you can go through these 10 tips for your tax return submission.
1. Set up your account and get your access codes
For the ones filling the tax return online for the first time, you will require your unique taxpayer reference (UTR). Once you send the registration request, the HMRC will send you the UTR via post usually within 7 days and can take up to 3-4 weeks. When you first sign up, you will have a user ID number which you can use to log in to HMRC online account. Do not misplace the details, for you might have to get new ones; an added task you might want to avoid. Both sole traders and those operating through a limited company, own limited company, or their own business must register and are responsible for their own tax affairs, including paying taxes and national insurance contributions.
2. Sort your record
Get all your receipts, papers, statements in order to start the procedure of filling the tax return. You must have complete record of your accounts, incomes and expenses. It is imperative to review your bank statements and note the amount of interest you have accumulated over the past tax year. Maintaining a separate business bank account is important to track gross income, income received, and business expenses, which helps ensure accurate tax reporting and makes it easier to identify tax deductible costs.
3. Claiming your expenses
You must know which expenses you can claim, meaning which are “allowable expenses”. To calculate the taxable profit, you can deduct those business expenses from your income. Some of the expenses that are allowed are travel costs, office and equipment costs, insurance costs, and mileage. You can always locate more details about the self-employed expenses on the government’s webpage. You can subtract house utility bills for a work from home profile. Only tax deductible expenses can be claimed; for example, a locum doctor can claim professional indemnity insurance as a tax deductible expense.
4. Cross check the details of finances
While calculating your income and expenses for the particular tax year, make sure to cross check the numbers. Check your payment receipts, bills, record of pension payments (if you have made any), the indemnity you have accumulated over the year and also the expenses incurred. Cross check and match your payments you received in bank versus the invoice you issued and similarly, check the payments you have made against the receipts you have. Ensure all untaxed income and dividend income are included, and remember that income from dividends or investments must be reported on your self assessment tax returns.
5. Look for answers online
If you have certain question then calling the HMRC is not always the best idea as it is known that the helpline call waiting time are most often long. The best way to go about getting your answer is to look if it is available online on the government website under the help sheets and guidance notes. You can also turn to social media for basic help. However, by all means avoid giving out any personal details on public platform. HM Revenue & Customs (HMRC) provides detailed guidance on UK tax, income tax, and national insurance contributions for locum doctors.
6. Pension tax relief, Gift Aid, EIS investment
You want to save on tax efficiently, pensions are your solution. You get tax reliefs for contributions you make towards your pension. A high rate taxpayer can claim additional 20% and additional taxpayer, an extra 25%. At present, you can claim tax relief of up to 100% of your salary on pension contributions (a maximum of £40,000). For a high rate taxpayer, you can also take advantage of the tax relief through Gift Aid (charitable donations) and making investments EIS and SEIS companies (30%). Higher rate taxpayers can claim additional relief through their Self Assessment tax returns, and personal allowance may be reduced for high earners, affecting their tax liability. If you claim child benefit and your gross income exceeds certain thresholds, you may need to repay some or all of the benefit.
7. Put aside money for payments
After thoroughly completing the procedure and submitting your tax return filing forms, you will need to pay the tax bill that you owe to the HMRC. The deadline to pay the bill is 31 January, same as the tax return filling deadline. You might not want to wait till the last moment as the payments can take few days to process. Hence, to ensure the payment is cleared before deadline, you need to transfer the bill amount a little prior. You also want to make certain that you have enough money to steer clear of cash-flow problems. Paying your taxes and national insurance on time is crucial, as missing the filing deadline can result in interest charges and penalties.
8. Beware of deadlines and late fines
In case you fail to file the self-assessment by the stipulated deadline, you will be fined a late fee of £100 even if you do not owe any tax, i.e. if you fail to adhere to the deadline of 31 January. Remember, if you are filing the tax return on paper then the deadline is 30 October following the end of the tax year. This fee will keep adding if you further fail to file your return. After three months, it would be £10 a day, a maximum up to £900. Post six months, £300 or 5% of the tax you owe. 12 months’ delay will cost you Additional £300 or 5% of the tax you owe (for exceptional cases, this fee can be u to 100% of the tax due). The filing deadline for self assessment tax returns is 31 January, and late filing can result in penalties from HM Revenue.
You must also notify the HMRC of any new source of income which has a tax liability by 5 October. If you miss it then you will be penalised with “failure to notify”.
In case if you feel you have been penalised incorrectly then you can always appeal to the HMRC. You will need to prove that you have a “reasonable excuse”.
9. Consider seeking expert advice
It is always possible that in last minute filing of returns, some minute things may go unnoticed by you which will never miss the eye of an expert. Besides, it can also help you save money on tax as well as time while relieving you of the hectic task. If you have an accountant for Self assessment tax return, you can also take advice from them to be tax efficient and even deduct the accountant fees. The main benefits of using an accountant include ensuring all taxes, corporation tax (if operating as a company), and allowable expenses are correctly reported, and that you pay corporation tax and other liabilities on time.
10. Be pre-prepared for the next tax year
Once you have the experience of going through the process, you must act smartly and start making plans to better manage the tax returns in future. This will save the last moment hassles. No details will be missed. You need to sail through the various tax rules and should you have any doubt at any moment about whether you can manage it all by yourself then know that specialist advice is always available. Write to us at info@targetaccounting.co.uk. It is important to keep your business and personal finances separate, use a separate business bank account, and understand your responsibilities as a sole trader, limited company, or employee.