Tax Return

Why do I submit a self employed tax return
People seem to have different opinions on whether you need to do a tax return if your self employed income is below a certain amount. All of the advice I've found online (and from people that I've spoken to in 'real' life) is that if you are receiving any form of earnings, whether they're through ebay/etsy/paypal/bank transfer/cash in hand etc, you are legally required to declare this income, no matter how much it is. You are also meant to submit a tax return if your business made a loss, or you only had your business for part of the tax year.
It's also really important if, like me, your business is what you do full time, so that you are actually registered as employed; I don't think I've ever felt worse than when I've been in situations where people have made comments about me not working or living off of my husband for money!

Declaring small business earnings alongside part time job earnings
When you register to complete the tax return (self assessment) you’ll need to enter when your business started and whether this is your only income or if you have another job or another business alongside this (I think I've remembered this correctly but it was a while ago I registered!) If you have a small business alongside another form of income you’ll likely need your P45, which has information you’ll need about your other employment earnings/tax & national insurance.
On your tax return there will be a section about your part time job, and a section about your small business. You have to enter your national insurance number so HMRC already know certain things, for example some details that I wouldn't have known about my university student finance were already entered on my tax return for me.

Step by step of the tax return process

1. Registered for self assessment 
I started by googling something like 'self employed tax returns' and I ended up on this website You pretty much just need to follow the steps and I found that google is a girls best friend in this process hehe. You receive an acknowledgement once you have registered (I think this was sent via email)

2. Self Assessment Activation Code 
I was then sent a document in the post with an activation code for completing my tax return online. There was a step by step on the letter of how to do this and it had to be done within 28 days.

3. Unique Taxpayer Reference 
I also received a letter with my unique taxpayer reference, which is also needed for completing your tax return online. At this point I did get a bit confused as I was able to log into everything online, but it didn't give me the option to access my tax return - this was just because I was trying to do it too soon after setting everything up though and I needed to wait for the next letter:

4. Notice to complete a tax return letter 
I then received a letter telling me that I needed to complete my tax return. This letter contained the link for completing my tax return online and it reminded me of the deadlines.

5. Completing the tax return 
If you have all of your figures from your income/expenses already calculated (see below for more information on how I do this) then this really doesn't take too long; I'd say about half an hour.
The tax return is split into different sections so you have the option to fill out just one section at a time, save it and then come back to it at a later date. You can also check back over everything you've filled in and make any necessary changes.
Once you've submitted the tax return you still have the option to make amendments (this is something I was really surprised about; I must have checked, double checked, triple checked it a hundred times as I was so worried about making a mistake!)
I filled mine out by myself (I had terrible nightmares about having to spend hundreds on an accountant to help me, so for all of the people who've told me how worried they are about it please, please don't worry - if I can do it I promise you can too) you just follow the form and each section has a little '?' help box which gives you more information. Again google is a girls best friend for anything you don't understand and there are lots of help videos on youtube too.

6. Once you've completed your tax return 
Once I'd filled mine out it gave me the option to both print and save my tax return, which they recommend you do so you have a record of the file.
I asked my husband to check through it for me before I submitted it, as I always think a fresh pair of eyes are better at noticing any mistakes.
Once you submit the return you receive an email as a receipt of successful submission and this also has a reference number for you. It advises you to wait 72 hours and then you can check what tax you need to pay, you can see that your tax return has definitely been submitted, you can still amend the return, you're able to view your 'SA302 tax calculation' which basically summarises your income and tax, and you can also view your tax year overview.

Income and Expenses for my business

Keep spreadsheets!! 
I cannot stress how important it is to keep a good record of both your income and expenses for a small business. I did keep a record from when I started Handmade by Holly in May 2016, but I went with the 'old fashioned' way of doing it all in a notebook, and honestly it's caused me so many hours of stress and piles and piles of paperwork over the past couple of months! So if you only take one piece of advice away from this post, it's to keep a computer spreadsheet from the moment you start receiving a self employed income (even if it's really low/your expenses are more than your income etc - it's so much better to have it all on file just in case you ever do need it!)

How I keep a record 
The system that I now use is to have an 'income' spreadsheet for each month where I enter each payment I receive (I also like to keep a record of the fees I pay to paypal on here) and I add this into a total at the end of each month.
I have an 'expenses' spreadsheet for each month where I enter each item that counts as an expense 
(see next point) which I also add into a total at the end of each month.
I then also have a spreadsheet for the tax year where I enter my total income for each month, my total expenses for each month and then I subtract the expenses from the income to work out my profit for each month. 
At the end of the tax year I can then find a figure for my total yearly expenses/income/profit and these figures are all you actually need for your tax return (so this is your most important spreadsheet!)
Recording everything like this means that when you come to submit your tax return it won't take you too much time/stress as you've already calculated all of the figures you need :)

When you fill out your tax return it gives you a '?' help box on expenses where it advises you of what can count as expenses. 
For my expenses I've included things like the cost of posting my items to my customers (this is obviously my biggest expense), my postage supplies (i.e. postage bags, cellophane, tissue paper etc) and then my supplies for making my items (i.e. teddy bear stuffing, fabric, sewing thread etc) 
I have also heard that if you work from home you can include a percentage of some of your bills for expenses, but I don't know much about this as it's not something I worried about doing as my income is quite low.

My laptop and my folders 
I use my laptop for my spreadsheets and I have a lever arch folder for each tax year which contains two polly pockets for each month; one for my income where I print out my Paypal invoices and my monthly income spreadsheet, and the other is for my expenses, where I keep all of my receipts (both from online purchases and shop purchases) and my monthly expenses spreadsheet.

Expenses evidence 
So this is maybe the most important point for me - I don't know if I'm going to sound like a total idiot, but if only I'd known this before submitting my tax return, I could have avoided many hours of stress, worry and sleepless nights!
I always imagined that you would have to send HMRC evidence of both your income and expenses. I 
couldn't work out how this would work with submitting a tax return online; I had visions of having to upload hundreds of files and scan through all my receipts (I know this probably sounds completely ridiculous given the level of tax returns they must receive!) but I'm a very conscientious person and I always think things have to be done 100% precisely (I couldn't work out why the tax return was rounding up/rounding down my figures until James told me to take a chill pill and they just do it to the nearest pound rather than worrying about pennies haha) 
Obviously it's really important to still keep a record and evidence of all of your income and expenses as HMRC could ask to see them (which is something the tax return also reminds you of) but when you're submitting your return you don't actually have to provide any evidence

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