If you find yourself confused by self-assessment tax returns, struggling to understand what you need to pay and when, or baffled by how to complete the form, then this blog is for you.
In this guide, we’ll take you through everything you need to know about self-assessment, covering what, why, when, and how to make filing a tax return stress-free.
What is a self-assessment tax return?
A self-assessment tax return is intended for individuals whose income isn’t taxed automatically when it’s paid. They are a way of telling HMRC how much untaxed income you have received, so that it can be taxed correctly. Self-assessment tax returns can be completed via a paper form or online and you will be asked several questions about your income and expenses for the previous tax year. HMRC will then calculate what you owe based on what you report. The reason it is called “Self-Assessment” is because it is your personal responsibility to self-confirm, and check that the information you submit is correct.
Who needs to complete a self-assessment tax return?
You must complete a self-assessment tax return if, in the last tax year (6 April to 5 April), you were:
· self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on) · a partner in a business partnership · an employee earning over £100,000
You may need to send one if you have any other untaxed income, such as:
· money from renting out a property · tips and commission · income from savings, investments, and dividends · foreign income
You can also choose to fill in a return to:
· claim some Income Tax reliefs · prove you’re self-employed, for example to claim Tax-Free Childcare or Maternity Allowance
If you get Child Benefit:
· If your income (or your partner’s, if you have one) was over £50,000, you may need to send a return and pay the “High Income Child Benefit Charge”.
If you’re still not sure whether you need to send a return, then you can check here: Check if you need to send a Self Assessment tax return - GOV.UK (www.gov.uk)
How do I register for a self-assessment tax return?
If you’ve never submitted a tax return before, you’ll need to register for self-assessment and create an account with HMRC. HMRC has different methods for registering depending on your employment status. Here are the links for each:
Register for Self Assessment: Register if you’re self-employed - GOV.UK (www.gov.uk) Register for Self Assessment: Register if you're not self-employed - GOV.UK (www.gov.uk) Register for Self Assessment: Register if you're a partner or partnership - GOV.UK (www.gov.uk)
To create an account there are a few pieces of information you will need to hand, including:
• Your contact details • Your National Insurance number
You must register by 5th October after the end of the tax year that you are required to submit a tax return. For example, if you need to submit a tax return for the 2020/21 tax year, you’ll need to register by 5th October 2021.
Once you’re registered, HMRC will send you a Unique Taxpayer Reference (UTR) in the post within 10 days, along with instructions on how to create a Government Gateway account. You will then be sent an activation code for your Government Gateway account and then you can access the self-assessment area to submit your tax return.
The tax year is a 12-month period from the 6th April to 5th April each year. As well as the 5th October deadline for registering for self-assessment, HMRC has the following deadlines:
Paper tax returns Midnight 31st October after the end of the tax year
Online tax returns Midnight 31st January after the end of the tax year
Pay the tax you owe Midnight 31st January after the end of the tax year
There’s usually a second payment deadline of 31st July if you make advance payments towards your bill (known as ‘payments on account’).
There are other deadlines for special circumstances, such as if you’re a trustee or in a partnership and these can be found here: Self Assessment tax returns: Deadlines - GOV.UK (www.gov.uk)
You’ll get a penalty if you need to send a tax return and you miss the deadline for submitting it or paying your bill. You’ll pay a late filing penalty of £100 if your tax return is up to 3 months late. You’ll have to pay more if it’s later, or if you pay your tax bill late. You’ll also be charged interest on late payments.
You can estimate the cost of penalties here: Estimate your penalty for late Self Assessment tax returns and payments - GOV.UK (www.gov.uk)
You can appeal against a penalty if you have a reasonable excuse, but you must contact HMRC as soon as possible. If you have missed your self-assessment payment date you can phone the self-assessment Payment Helpline on 0300 200 3822.
HMRC list reasonable excuses as:
· The death of a partner or close relative shortly before the deadline · An unexpected stay in hospital that prevented you submitting your tax return · You had a serious or life-threatening illness · Your computer or software failed while you were preparing a return · Issues with HMRC’s online services · A fire, flood or theft prevented you from submitting your tax return · Unforeseen postal delays · Delays related to disability
Need further help?
You don’t have to manage self-assessment alone. Hiring a professional can take all the stress and worry away and it won’t cost as much as you may think.
Virtual Accounts and Taxes can help you register properly and ensure you never miss a deadline. To learn more, book a call today.