The numerous tax liabilities involved with owning and managing a limited company make efficient reporting of personal income complex and occasionally tedious.
However, annual Self-Assessment tax returns are a crucial part of staying compliant in the eyes of HM Revenue & Customs (HMRC) and avoiding fines or penalties.
The Individual Self-Assessment tax return, commonly known as ITSA, is usually the fundamental way in which Directors and senior management declare their taxes.
This is a requirement for individuals who have additional income outside of Pay As You Earn (PAYE) and you won’t be taxed twice on the income that you receive through traditional wages.
In this guide, we'll delve into the intricacies of ITSA for limited companies and their directors and how to stay compliant with HMRC regulations.
Who needs to complete a Self-Assessment?
If you're a Director of a limited company, you may need to complete an ITSA return.
This is especially true if you have other sources of income, such as rental income, dividends, or interest on savings.
Even if your income is solely through your limited company, it's advisable to complete a Self-Assessment to declare any dividends you've received.
How to register for Self-Assessment
Before you can submit your tax return, you'll need to register for Self-Assessment with HMRC.
This can be done online through the Government’s Making Tax Digital (MTD) for ITSA service and needs to be completed by 31 January 2024.
Once registered, you'll receive a unique taxpayer reference (UTR) and be enrolled for the Self-Assessment online service.
What information is required?
The Self-Assessment form requires various details, including:
· Personal information
· Income from employment
· Dividend income
· Rental income
· Capital Gains
· Pension contributions
You should ensure that you have all the necessary documentation to hand, such as P60s, P11Ds, and any other relevant records.
An accountant can help you organise your documents and make sure you have all the relevant paperwork before you file your tax return, taking some of the stress off your shoulders.
Deadlines and penalties
The deadline for paper submissions is 31 October 2023, while online submissions must be completed by 31 January 2024.
Missing these deadlines can result in severe penalties, especially in the new climate of automatically applied fines and penalties, introduced by HMRC in the last tax year. The fines increase the longer you delay, so it's crucial to be punctual.
Again, this is something that an experienced accountant can help with.
Understanding and completing your Self-Assessment tax return is a vital part of managing your limited company's finances.
By staying organised, keeping accurate records, and meeting deadlines, you can avoid unnecessary stress and potential penalties.
If you're unsure about any aspect of the Self-Assessment process, seeking professional advice is always the best move.
Find out how we can streamline your Self-Assessment tax return process by getting in contact with one of our experts.