For all self-employed, the deadline to complete the dreaded annual Self Assessment tax return is looming.
If you’re a locum GP then this month may see you scrambling together paperwork, searching for government ID references and trying to make sense of your finances.
When I started out as a locum, I found managing the business side of self-employed work challenging.
Here are my 10 tips for submitting your tax return as painlessly as possible. Bear in mind tax rules can be very complicated; if you have specific queries or doubts you should seek advice from a specialist medical accountant
1. Get your paperwork together
As a self-employed locum GP you will need a full record of your accounts and your expenses. You also need to review your bank statements and record how much interest you have accrued over the last tax year.
Trawling through mountains of paper, receipts and statements to prepare for your tax return is a laborious process so you may find using one of the locum online organising tools to streamline and simplify this process
2. Have your access codes ready
If you’re filing online for the first time, you need to have your unique taxpayer reference (UTR), which can be found on letters from HMRC. You’ll then need to create a government gateway account and your activation code will be sent in the post. Activation codes usually arrive within 7 days. If you’ve used the Self Assessment online service before, you’ll have a Government Gateway user ID number, which was posted to you when you first signed up. You need to dig this out to sign in to your HMRC online account, along with your password. If you have misplaced your login details you can find out how to get new ones here.
3. Got a question? Look online first
Call waiting times for the HMRC helpline are often long (a bit like trying to bleep the registrar on call on a Friday afternoon!) Before you call, see if your question can be answered on the helpsheets and guidance notes on the government’s website. If you do need to speak to someone, the number for HMRC’s Self Assessment helpline is 0300 200 3310. Alternatively you can use Twitter to get general help but they can’t discuss specific cases or an individual’s tax affairs, so don’t give any personal details on Twitter. Start your tweet with @HMRCcustomers
4. Claim your expenses
You can subtract business expenses from your income to work out your taxable profit. These are called ‘allowable expenses’. It’s important to have a good understanding of which expenses are allowable, so that you pay the right amount of tax.
Expenses you can subtract from your income include indemnity costs, mileage, travel costs, equipment and office costs. There are more details on the government’s page on self-employed expense. If you undertake some work from home, you can deduct a certain portion of your household utility bills. There’s a simplified flat rate you can use to save you working out exact proportions of personal use versus business use. You can download a checklist of expenses you can claim here.
5. Check your finances match up
When you’re calculating your income for the tax year and the expenses you’ve incurred, ensure you cross-reference your numbers. For example, check you have been paid for each locum session, have a record of the pension payments that you’ve made, the mileage you have accumulated over the tax year and the expenses you have incurred. Also check your bank statement to make sure that the payments you’ve actually received match the invoices you’ve issued, and check that payments going out of your account match the receipts you’ve saved. This can be a laborious and time-consuming task; having a separate business bank account for your self-employed work helps.
6. Remember your pension tax relief
Pensions are a tax-efficient form of saving. You receive tax relief on contributions that you pay into your pension. Your self-assessment tax form is the place to claim additional tax relief on your pension contributions: another 20% if you’re a higher rate taxpayer, and an extra 25% if you’re an additional rate taxpayer. You can currently get tax relief on pension contributions up to 100% of your salary, up to a maximum of £40,000.
7. Avoid late penalties – file on time
If your Self Assessment return is late, you’ll have to pay an immediate fine of £100, and then penalties will keep piling up if you still don’t file your return. If you pay your tax bill late, you’ll be charged interest on your outstanding tax bill. If you don’t think you can pay your bill, contact HMRC and they may be able to extend the deadline or let you pay in instalments.
8. Making payment
Once you’ve filed your tax return, you need to actually pay your bill. The deadline for paying your tax bill is the same as the deadline for filing your tax return: 31st January.
However, the payments can take a few days to clear, so you will need to transfer the money before the deadline to ensure it is processed before the deadline.
9. Consider using a medical accountant
Hiring a good medical accountant can save you money on tax and spare you the time and effort of completing your tax return. Your accountant can also advise you on ways to be tax efficient. Accountant fees are also tax deductible.
10. Get organised for next time
If completing your tax return this year has been stressful, start putting measures in place now to make future tax returns more manageable. A good 2018 finance resolution could be to simplify all the record keeping that comes with locum work using one of the available online digital tools, and to open a business bank account that separates your self-employed finance from your personal account, so that your tax returns are more straightforward in the future.
Dr Surina Chibber is a portfolio GP in London and co-founder of MyLocumManager.com an online management software for locum GPs.