What is a self-assessment tax return?
Self-assessment is used by HMRC to calculate tax on your income. Generally, your tax is deducted automatically from your wages, pensions or savings – known as PAYE. However, if you receive any other income, you need to report this to HMRC by sending a self-assessment tax return once a year. This can either by filed online or you can send a paper tax return.
Do I need to submit a Self Assessment tax return?
You must submit a self-assessment if:
- Your self-employment income was more than £1,000
- Your income from renting out a property that was more than £2,500 (you will need to contact HMRC if it was between £1,000 and £2,500)
- You earned more than £2,500 in untaxed income, for example from tips or commission.
- Your income from savings or investments was £10,000 or more before tax.
- You need to pay Capital Gains Tax on profits from selling things like shares or a second home.
- You are a director of a company (unless it was a non-profit organisation, such as a charity)
- You or your partner’s, income was over £50,000 and you’re claiming Child Benefit
- You have income from abroad you need to pay tax on, or you live abroad but have an income in the UK.
- Your taxable income was over £100,000
- You earn over £50,001 for 2020/21 and make pension contributions you may have to complete an assessment to claim back the extra tax relief you are owed
- You are a trustee of a trust or registered pension scheme
- Your State Pension was more than your personal allowance and was your only source of income
- You received a P800 from HMRC saying you did not pay enough tax last year.
You can also fill in a Self Assessment tax return if you want to make voluntary Class 2 National Insurance Contributions (NICs) to help you qualify for benefits such as the State Pension.
You do not need to fill in a Self Assessment tax return if you are an employee who has paid tax through the Pay As You Earn (PAYE) system unless you earn over £100,000.
When do I need to register for Self Assessment – do HMRC issue me a Self Assessment notice or do I need to contact them?
If you meet any of the criteria mentioned above that means you need to complete a Self Assessment, the first step is to register. You need to do this by the 5th of October after the end of the relevant tax year. For the tax year that ran from 6th April 2020 to 5th April 2021, the deadline for registration is 5th October 2021.
Registering for Self Assessment is not an automatic process when you set up a limited company or register as self-employed, so you will need to notify HMRC of your situation. You can do this personally by phoning the Self Assessment Helpline on 0300 200 3310 or registering online. Alternatively, if you are our client, we can register you as part of our personal tax service.
When do I have to complete a Self Assessment?
You have to file your Self Assessment by 31st January after the end of the tax year it applies to. Tax years run from 6th April to 5th April. You do not have to wait, though. If you are employed, you can submit your Self Assessment as soon as you receive your Form P60 from your employer.
If you run your own company, you will need to issue the Form P60 from your PAYE system or get your accountant to prepare it for you. If you are a sole-trader then you can file your Self Assessment as soon as the tax year ends.
What happens if I do not register and file in time?
If you fail to notify HMRC, you may face a fine or penalty and will have to submit Self Assessments for prior tax years where applicable. If you are unsure whether you have registered, you can contact HMRC with your National Insurance number on hand to confirm one way or another.
If you fail to submit your return once you have registered for Self Assessment, you can incur some significant penalties. HMRC are becoming increasingly strict on deadlines and penalties for late returns, so we cannot stress enough how crucial it is to get your Self Assessment filed on time.
Self Assessment service
If you are an Outsourced ACC client, our Personal Tax Service will take away all the headache and hassle of completing and filing your personal tax, we will prepare your Self Assessment and once you have approved it, we will submit it online and let you know how much you need to pay HMRC.
Contact us on 0208 249 6007 for more information.
Written by Irina Stucere