Guides

Tax Return

Before You Start

If you are a landlord, freelancer, and director, ensure you have the following information:

Unique Tax Reference (UTR) (10-digit reference from HMRC)
Landlord statements, summary of rental income and expenses
Mortgage interest statement
Gather records (income, expenses, bank statements, P60/P11DP11D (if relevant) or details of PAYE income.
Business records (for self-employment) — income, expenses, profit/loss accounts.

Do’s and Don’ts by Basetax.ai based on HMRC guidelines:

Do’s:

Do register for Self Assessment early to avoid missing deadlines.
Do keep all records of income and expenses for at least 6 years.
Do file your tax return on time to avoid penalties and interest.
Do ensure you correctly report all sources of income (e.g., employment, self-employment, bank interest, dividends, rental income).
Do check if you qualify for any tax reliefs or allowances (e.g., Marriage Allowance, Blind Person’s Allowance).
Do submit your tax return online for faster processing and receipt of refunds.

Don’ts:

Don’t miss the filing deadline (31 January for online submissions).
Don’t include personal expenses as business expenses (only claim allowable business costs).
Don’t file inaccurate information or omit income, as it could lead to penalties or fines.
Don’t ignore any tax reminders or letters from HMRC.
Don’t delay paying any tax due, as it could accrue interest or penalties.

Step-by-step guide to filing a tax return through Basetax.ai:

Step 1: Open the Form- Click and open the appropriate tax form to input your income.
Step 2: Fill in Your Personal Information- Ensure you input your UTR correctly, along with other personal details.
Step 3: View Your Tax Calculation- The system will calculate your taxes based on the provided data.
Step 4: Validate Your Data- Once you’ve reviewed your details, validate your data and make any necessary payments before submitting.

For more general queries related to self assessment, click here

What Happens After Submission?

After submission, HMRC will automatically verify your data.
You will receive a confirmation email from HMRC within a few minutes (or up to an hour during busy periods).
If you don’t receive this email, contact support via live chat or email.
confirmation Email Example: "Thank you for sending the Self Assessment submission online. Your submission was successfully received on [Date]. It is now being processed. For more details, visit the HMRC website."

Bookkeeping

Do’s and Don’ts by Basetax.ai based on HMRC guidelines:

Do's:

Do maintain clear and accurate records of all transactions, including sales, expenses, purchases, and bank statements.
Do use software such as Basetax.ai for bookkeeping to ensure automated data capture and reduce human error.
Do store receipts, invoices, and bank statements for at least 6 years.
Do regularly reconcile your bank accounts to match your transactions with your records.
Do separate personal and business finances to avoid confusion and ensure compliance.

The Ultimate Bookkeeping checklist

Don'ts:

Don’t mix personal and business finances, as it complicates accounting and tax filing.
Don’t fail to keep receipts for business expenses; you may not be able to claim them without proof.
Don’t ignore updates to tax laws, which may affect your bookkeeping or tax obligations.
Don’t forget to update records regularly; waiting until the end of the tax year can lead to mistakes and missed deductions.

Step-by-step guide to Bookkeeping through Basetax.ai:

Step 1: Sign Up

Create an account on www.basetax.ai

Step 2: Access the Dashboard

After logging in, ensure you're in the correct tax year. You can add transactions either from the side menu or by using the ‘+’ sign.

Step 3: Enter Transaction

Once the transaction is recorded, your financial summary will be updated. Attach any electronic files or invoices for future reference and potential audits.

VAT

Do’s and Don’ts for VAT return by Basetax.ai based on HMRC guidelines:

Do's:

Do check if your turnover exceeds the VAT threshold (£85,000 for 2025) — you must register for VAT if it does.
Do file VAT returns on time — they are typically due every quarter, and failure to submit can lead to fines.
Do keep detailed VAT records — include invoices, receipts, and supporting documents for every transaction.
Do use MTD-compatible software for digital VAT filing to ensure compliance with HMRC’s Making Tax Digital requirements.

Don'ts:

Don’t forget to charge VAT on taxable sales if you are VAT registered.
Don’t mix VAT on personal purchases — only claim VAT on business-related purchases.
Don’t submit VAT returns late — HMRC can charge penalties and interest for delays.
Don’t overclaim VAT — ensure that all claims are based on valid business transactions.

Step-by-Step Process to File MTD VAT Return through Basetax.ai

Step 1: Sign Up

Step 2: HMRC Authorisation

Step 3: View & Open Obligation

Step 4: Load Transactions You can either:

Step 5: Review VAT Return

Check all details and review the return before submission.

Step 6: Submit VAT Return

Once submitted, you will receive a confirmation reference from HMRC.

Add section about VAT Rates understanding, covering concept of flat rate or cash scheme vs accrual accounting method.

Expenses

Do’s and Don’ts by Basetax.ai Based on HMRC Guidelines:

Do's:

What are allowable expenses and flat rate expenses

Why is it important to manage digital receipts?

Don'ts:

Don’t claim personal expenses (e.g., family meals or holidays) as business expenses.
Don’t forget to review the eligibility of each expense — HMRC has guidelines on what is and isn’t claimable.
Don’t mix capital expenditures with regular expenses — capital expenditures (e.g., equipment, machinery) are treated differently.
Don’t claim expenses that are not wholly for business use (e.g., private car usage). HMRC requires that only “wholly and exclusively” business expenses are deducted from your taxable profits. If you claim personal or mixed-use expenses, you risk:

Inaccurate tax returns – leading to underpaid tax or compliance issues.
HMRC penalties or interest – false or excessive claims can trigger fines ranging from 0% to 100% of the extra tax due, depending on whether the error is careless or deliberate.
Complex audits – improper expense claims may increase your chances of being selected for an HMRC review or audit.

Know more on HMRC’s website here

Find out detailed VAT Rates and schemes by HMRC

Best Practices by Basetax.ai for Recording Expenses According to HMRC Guidelines:

Step 1: Identify Allowable Expenses

Review HMRC’s guidelines to determine which expenses can be claimed (e.g., business-related travel, office supplies, equipment, utilities, etc.).

Step 2: Collect and Preserve Evidence

Obtain receipts, invoices, or digital copies for each expense. Ensure that all evidence is legible and complete. Ensure receipts include key details such as the date, nature of the expense, amount, and justification for business use.

Step 3: Categorise the Expense

Assign each expense to the correct category (e.g., travel, meals, office supplies, accommodation).

Clearly separate personal expenses from business expenses to avoid any confusion.

Step 4: Record the Payment

Only record expenses that have actually been paid, not just those incurred.

Log the expense details chronologically in your accounting system, ensuring that all information matches the evidence provided.

Step 5: Document Business Purpose

Note why each expense was incurred and ensure it was wholly and exclusively for business purposes.

Step 6: Retain Records

Keep all expense records for at least six years. For certain types of records, employers must retain them for three years from the end of the tax year.

Step 7: Reconcile Regularly

Regularly compare your expense records with bank statements and accounting software to identify any discrepancies or errors.

Step 8: Report Expenses

When filing your tax return, use the correct HMRC forms (e.g., P11D for employee reimbursements, or cash basis for self-employed individuals).

Step 9: Submit Claims Promptly

File your expense claims in a timely manner to ensure they are reported accurately and comply with HMRC guidelines.

Step 10: Back Up Your Records

Maintain digital or physical backups of your records to safeguard against loss or damage. Ensure records are easily accessible for HMRC audits.

Limited Companies

Do’s and Don’ts by Basetax.ai based on HMRC guidelines:

Do's:

Do keep records of your company’s income, expenses, and bank transactions and file accounts with Companies House.
Do submit your Corporation Tax Return to HMRC after your company’s financial year ends.
Do declare dividends properly — ensure they are correctly accounted for and meet the criteria for tax-free allowance.
Do ensure accurate VAT submissions (if registered), including submitting VAT returns quarterly under Making Tax Digital rules.
Do maintain records of company directors, shareholders, and share transactions.

Know more about Confirmation Statement and Timelines

What is Director’s loan account (DLA)? Treatment and repayment rules

Don'ts:

Don’t delay your annual filings — failing to file your company accounts on time can lead to automatic fines from Companies House.
Don’t neglect compliance with PAYE (for employee tax deductions) — this is a legal requirement for employees.
Don’t distribute profits through dividends if there are insufficient reserves to meet company obligations.
Don’t ignore your tax liabilities — corporation tax is due nine months after the end of your accounting period.

Best Practices by Basetax.ai to Register Your Limited Company with HMRC

Step 1: Decide on Your Company Structure

Step 2: Choose a Company Name

Step 3: Register with Companies House

You must register your company with Companies House, the official government registrar of companies in the UK.
Go to the Companies House website to complete the registration process. This can be done online or by post.
You will need to provide information such as the company’s name, registered office address, directors, and share capital.

Step 4: Prepare Company Documents

Prepare and file the following required documents:

Memorandum of Association: A legal statement signed by all initial shareholders (also known as subscribers) confirming their intention to form a company.
Articles of Association: A document that outlines the rules about how your company will operate (this is optional if you’re adopting the model articles set by Companies House).
Company Directors and Shareholders: Provide details of your directors, who are legally responsible for running the company.
Registered Office Address: Provide an official company address where communications will be sent.

Step 5: Obtain Your Company’s Unique Taxpayer Reference (UTR)

After registration, HMRC will send a Unique Taxpayer Reference (UTR) number to your company’s registered address. This is necessary for tax purposes and company tax filings.

Find your UTR Number here.

Step 6: Register for Corporation Tax with HMRC

After your company is registered with Companies House, you must inform HMRC within 3 months that your company has started trading.

Register your company for Corporation Tax via the HMRC website. This ensures your company is taxed on any profits it makes.

Step 7: Register for VAT (if applicable)

If your company’s taxable turnover exceeds the VAT threshold (£85,000 for 2025), you must register for VAT with HMRC.

You can also choose to register voluntarily if you want to reclaim VAT on your business purchases before reaching the threshold.

Apply for VAT registration through the HMRC website.

Step 8: Set Up PAYE (If You Have Employees)

If you intend to employ people, you will need to set up PAYE (Pay As You Earn) to deduct income tax and National Insurance from your employees’ wages.

Step 9: Set Up a Business Bank Account

Open a business bank account in the company’s name.

Ensure the account is separate from your personal finances to comply with business regulations and make it easier to manage your company’s finances.

Step 10: Keep Proper Records

Start maintaining proper financial records from day one, including income, expenses, and tax payments.

These records are essential for accurate tax filings and company reports.

Step 11: File Annual Accounts and Tax Returns

Once registered, your company must file annual accounts with Companies House and a Corporation Tax Return with HMRC every year.

Directors must also submit a Confirmation Statement to Companies House annually to verify the company’s information.

Step 12: Maintain Your Company’s Compliance

Keep track of any changes in your company (e.g., change of address, directors, or shareholders). Ensure timely filings to avoid penalties, and maintain up-to-date financial records for accurate tax returns and compliance with HMRC and Companies House regulations.

Start-Ups

Do’s and Don’ts by Basetax.ai based on HMRC guidelines:

Do's:

Do register your business with HMRC for tax purposes and ensure you comply with Self Assessment or Corporation Tax obligations.
Do keep comprehensive records of all income and expenses from day one to support future tax filings.
Do file your tax returns on time — it’s easy to miss deadlines when you’re starting out, but penalties apply for late submissions.
Do consider setting up a business bank account to separate business finances from personal funds.
Do use accounting software for easier tax filings and financial management.
Startups in the UK can access various grants and funding through government schemes like Innovate UK (for R&D), the Start Up Loan Scheme (for loans up to £25,000), and programs like the Prince's Trust for young entrepreneurs

Know more about StartUp Loan Scheme and Prince’s Trust.

Don'ts:

Don’t delay registering for VAT if your turnover exceeds the threshold — registering late will result in penalties.
Don’t miss out on tax deductions — early-stage businesses can benefit from tax reliefs and incentives (e.g., R&D tax credits).
Don’t forget to track every transaction — even small expenses can add up and be deducted from your taxable income.
Don’t ignore the importance of proper record-keeping — you need to be prepared for any future audits or tax inquiries.

Best Practices by Basetax.ai to Register Your Startup with HMRC

Step 1: Register Your Business

Register your business with HMRC and ensure compliance with HMRC’s tax registration processes for startups (e.g., VAT, PAYE, corporation tax).

Step 2: Set Up Bookkeeping

Basetax.ai provides automated bookkeeping tools to track income and expenses from day one, making it easier to file tax returns and stay compliant.

Step 3: Understand Your Tax Obligations

Basetax.ai provides personalised tax advice to ensure startups meet all HMRC tax obligations, including self-assessment, VAT, and PAYE (if applicable).

Step 4: Apply for Business Grants or Loans

Basetax.ai connects startups to funding options via integrated lending marketplaces like Capitalise, helping secure necessary capital for growth.

Resources:

https://assets.publishing.service.gov.uk/media/5d67ec82ed915d53adcf51a7/ Understanding_the_experiences_of_start-up_businesses.pdf

https://assets.publishing.service.gov.uk/media/61a4df20d3bf7f05539de4f9/Start_Up.pdf

https://www.gov.uk/set-up-business

Tax Savings

Do’s and Don’ts by Basetax.ai based on HMRC guidelines:

Do's:

Do claim all available tax reliefs such as R&D tax credits, annual investment allowance (AIA), and business mileage allowances.
Do maximise your personal allowance and tax-free thresholds — make sure you are claiming all deductions you are entitled to.
Do contribute to your pension scheme — this is a tax-efficient way to reduce taxable income.
Do track business losses — you may be able to offset them against future profits for tax savings.
Do keep up-to-date with changing tax laws — take advantage of new reliefs and opportunities as they arise.

Don'ts:

Don’t ignore tax-saving opportunities — be proactive in seeking out allowable expenses, reliefs, and credits.
Don’t forget about capital allowances — ensure you claim for business assets, which can significantly reduce your tax bill.
Don’t attempt tax avoidance — HMRC has strict rules on what constitutes allowable tax savings; unlawful actions can lead to penalties.
Don’t overestimate your expenses — only claim what is allowable under HMRC’s rules.

Best Practices for Tax Savings by Basetax.ai, According to HMRC Guidelines

To help you reduce your tax liability, HMRC provides various allowances and reliefs. Here’s a step-by-step guide on how to effectively use these tax-saving strategies:

Personal Allowance

Your Personal Allowance allows you to earn a certain amount of income tax-free each year. For the tax year 2025/2026, this allowance is £12,570.

How to use it?

If your total income (wages, pension, savings, etc.) is below this amount, you do not have to pay any income tax. If your income exceeds this amount, you will pay tax on the excess.

Tip: If you are not using your Personal Allowance due to other income sources (like wages or pensions), you can use it towards tax-free interest on savings.

Starting Rate for Savings

The Starting Rate for Savings allows you to earn up to £5,000 of interest on your savings without paying tax.

Eligibility: You are eligible for this rate if your other income (e.g., wages or pension) is less than £17,570. The more you earn from other sources, the less interest you can earn tax-free.

How it works: For example, if you earn £16,000 from wages, your Personal Allowance of £12,570 will be used up, and the remaining £3,430 reduces your Starting Rate for Savings. In this case, you could still earn £1,570 of tax-free interest.

Personal Savings Allowance (PSA)

The Personal Savings Allowance is an allowance that allows you to earn interest on savings without paying tax, depending on your income tax band:

How to use it?

Add all the interest earned from your savings (e.g., bank accounts, credit unions, peer-to-peer lending) to your other income, and your PSA will reduce your tax liability accordingly.

Tip: Ensure to check your tax band to see if you can benefit from the full £1,000 or £500 savings allowance.

Tax-Free Interest from ISAs and Certain Accounts

Savings in Individual Savings Accounts (ISAs) and certain National Savings & Investments (NS&I) accounts are not subject to tax on the interest earned. This means any interest you earn in these accounts will not count toward your Personal Savings Allowance.

How to use it?

Tip: If you’re not already using your full ISA allowance, consider transferring some savings into an ISA to take advantage of the tax-free interest.

Capital Allowances and Tax Reliefs for Businesses

If you own a business, you can reduce your taxable profit by claiming capital allowances on business assets like equipment, machinery, and vehicles. This helps lower your business’s Corporation Tax liability.

How to use it?

Tip: Keep detailed records of purchases and investments in assets and apply for these allowances on your business’s tax return.

Salary vs Dividend

Tax Relief on Pension Contributions

Contributions to a pension scheme are tax-efficient, as they reduce your taxable income. This is particularly beneficial for higher-rate taxpayers, as the tax relief is based on your income tax band.

How to use it?

Tip: Consider paying into a pension scheme to lower your taxable income while saving for retirement.

Gift Aid Donations

If you donate to charity through Gift Aid, the charity can claim back 25% of your donation from HMRC. Additionally, your donations can be deducted from your taxable income.

How to use it?

Tip: Track your charitable donations and ensure they are made via Gift Aid to get the maximum tax benefit.

Claiming Tax Relief for Working from Home

If you work from home, you can claim tax relief on some of your household expenses, including heating, electricity, and broadband.

How to use it?

Tip: Keep a record of your home office costs, including any receipts or invoices for work-related expenses, to claim the tax relief.

Inheritance Tax Efficiency Tips

Find the checklist for annual tax planning

Key Considerations for Tax Savings:

Know your Tax Band: Make sure you understand your income tax band (Basic, Higher, Additional) as it affects how much you can claim for savings, interest, and other reliefs.
Keep Track of Deadlines: Ensure you file your tax returns on time and take advantage of any available tax reliefs before the end of the tax year (5 April).
Consult a Tax Professional: If you have complex financial situations (e.g., investments, international income, or business expenses), it’s wise to seek advice from a tax professional or accountant

How to apply for tax free interest savings?

Data Security & GDPR Compliance

HMRC’s (Her Majesty’s Revenue and Customs) guidelines on data security and GDPR compliance are aligned with the General Data Protection Regulation (GDPR) and the Data Protection Act 2018.

Basetax.ai, comply with UK GDPR and the Data Protection Act 2018.

Data Protection Principles

Under Article 5 of the UK GDPR, HMRC mandates adherence to these core principles:

Lawfulness, fairness, and transparency – Data must be collected and processed transparently.
Purpose limitation – Use data only for specified tax or compliance purposes.
Data minimisation – Collect only what is necessary.
Accuracy – Keep data up to date and correct inaccuracies promptly.
Storage limitation – Retain data only for as long as required by law.
Integrity and confidentiality – Ensure secure storage, transmission, and handling of data.
Accountability – Be able to demonstrate compliance with GDPR principles.

HMRC’s GDPR compliance

HMRC processes personal data under Article 6(e) of GDPR and processes special category data under Article 9 of GDPR, following the HMRC Privacy Notice and appropriate policy documents.
Personal data retention follows HMRC’s Records Management and Retention and Disposal Policy.
Any sharing of personal data outside HMRC must comply with HMRC’s data sharing guidance, contracts, and standards as published on the Information Commissioner’s Office (ICO) website and the HMRC Information Disclosure Guide.
HMRC applies strict technical and organisational measures to ensure data security and prevent unauthorised access or breaches.
Data subjects have rights which HMRC acknowledges and facilitates according to GDPR.
Further general GDPR compliance under HMRC guidelines includes documenting processing activities, providing clear privacy notices, securing data with appropriate controls, reporting breaches to the ICO within 72 hours, and ensuring lawful bases for processing all personal data held.

Contact & Support

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Tax Return

Bookkeeping

VAT

Expenses

Limited Companies

Start-Ups

Tax Savings