Preparing the paperwork
Good preparation and record keeping will make self-assessment a smoother process, so make sure your paperwork is in order.
In order to complete an accurate tax return, you will need to keep good records. Doing so is a legal requirement and you may be asked to produce your paperwork if your tax return is queried.
You should keep your financial records for at least six years.
The documentation you need will vary according to your circumstances, but must include details of all your income and all the expenses you want to set against that income.
Keep all of this information in a secure location. Then, well before your tax return is due, check you have everything needed to complete the form. Most commonly, the documents you will require include the following:
- Details of income from your employment (a P60 or P45 form);
- Details of income from self-employment;
- Information on pension contributions or receipts;
- Details of income from letting property or land;
- Details of capital gains or losses;
- Details of income from any UK savings and investments;
- Details of life insurance gains and AVC refunds;
- A record of any other taxable income you have;
- Details of any gifts to charity if you intend to claim tax relief on them;
- Details of any other commitments that are eligible for tax relief.
If you fail to keep proper records for tax purposes you could face a fine of £3,000. The rule is to keep your documentation for six years, but it might be worth keeping the paperwork for 20 years, because this is the time limit for an HMRC investigation if it suspects there might be fraud.