A self-assessment tax return is an online or paper form that has to be submitted to HMRC every year by those who owe tax on income they’ve received. In some cases, tax is deducted automatically from your wages or pension – known as PAYE.
However, if you receive any income from the following sources – such as from self-employment, capital gains or dividends – you need to report this to HMRC by submitting a self-assessment tax return.
Who Pays Self-Assessment Tax?
More than 12.1m people were expected to file a self-assessment tax return for the last tax year. If you’re self-employed, you’ll need to submit a self-assessment tax return every year, to pay income tax and National Insurance on your profits.
You can find out more as you read on below on how to file a self-employed tax return.
Other people who need to fill in a tax return include anyone who:
- Earns £100,000 or more last tax year as an employee or pensioner.
- Earned £10,000 or more from savings interest, or investment income (however, note that you should also declare income from savings interest above the personal savings allowance, and dividend income above the £1,000 dividend allowance).
- Earned £2,500 or more in untaxed income – for instance, from tips or commission.
- Needs to claim tax relief on pension contributions if you’re a higher- or additional-rate taxpayer.
- Owes capital gains tax from selling assets at a profit.
- Claims child benefit, if your or your partner’s income is over £50,000.
- Receives taxable income from abroad, or lives abroad but receives an income in the UK.
- Receives state pension payments that exceed your personal allowance and it’s your only source of income.
- Is a business partner, or director of a limited company.
- Is a trustee of a registered pension scheme or other trust.
- Is a trustee or representative of someone who has died.
- Is a name’ at the Lloyd’s of London insurance market.
- Is a minister of religion.
- Received a P800 form from HMRC saying you didn’t pay enough tax last year, and you haven’t yet paid the outstanding sum.
In some cases, you may need to complete a self-assessment tax return and also pay via PAYE: for instance, if you receive a private pension or investment income, make a taxable capital gain or run a business on the side of your employment.
If you run a limited company, you’ll need to file a company tax return in addition to a tax return on your personal income.
Will I Be Sent A Tax Return?
You’ll usually be sent a tax return if:
- You have untaxed income from investment, land or property, or from overseas.
- You make capital gains above the annual exempt amount (£12,300 in 2022-23, dropping to £6,000 in 2023-24).
- You were required to fill in a tax return last year.
- You’re a pensioner who gets reduced age-related allowance – though you may be sent a special short version that requires fewer details.
You shouldn’t rely on HMRC to contact you before submitting a tax return if you know you owe tax. It’s your responsibility to make sure you declare all taxable income each year.
If you receive a tax return, you must return it, regardless of whether you owe tax or not.
Step-By-Step: How To Register For Self-Assessment
If you’re looking to submit a tax return for the first time, you’ll need to register for self-assessment first.
The steps are below:
1. Register with HMRC: The process will vary depending on whether you’re self-employed, registering a partnership or not self-employed – you should click on the option that applies to you. You can register online via HMRC.
2. Get your Unique Taxpayer Reference (UTR) number: HMRC will send this to you in a letter after you register. The letter will give instructions on how to set up your Government Gateway account.
3. Use your activation code for your Government Gateway account: Once this is done, you’ll be sent another letter in the post containing your activation code. You’ll need this to complete the set-up of your account – you should do this promptly as the code will expire.
4. Complete your account setup: It’s only once your Government Gateway account is up and running that you’ll be able to log in and submit your tax return.
HMRC warns that the whole process could take up to 20 working days, so make sure you don’t leave it until the last minute.
How To Fill In A Self-Assessment Tax Return
When you submit your tax return online, you’ll just need to fill out the sections that apply to you.
For paper tax returns, you’ll need to work out which sections are relevant. Most people will just have to fill out the SA100 form. However, there are several supplementary pages that may apply to your circumstances.
Some employees, pensioners and self-employed people with a turnover of under £85,000 can be sent a simplified SA200 return. At four pages long, it’s much shorter. Unfortunately, you can’t opt to fill in this shorter form – HMRC will decide and send it out to you. Details you may need to include on your tax return include:
- Income: all taxed and un-taxed income from self-employment, taxable interest from savings, dividends from shares, or capital gains from selling assets
- State pension: the total amount of state pension payments you were entitled to receive, plus any lump sum
- Private pensions: detail the gross amount of any annuities or lump sums
- Benefits: include anything you’ve received in incapacity benefit and jobseeker’s allowance, plus the total of taxable benefits from bereavement allowance, carer’s allowance or industrial death benefit
- Other income: this is anything not related to interest or dividends, and you can also include any allowable expenses related to this income
- Pension contributions: all payments where deductions were made after tax
- Charitable donations: include the total amount of Gift Aid donations
- Blind Person’s Allowance: you just need to confirm whether or not you’re claiming this
- Student loan repayments: detail deductions made by your employer
- High income child benefit charge: this is only for those receiving child benefit when they, or their partner, earn more than £50,000
- Marriage allowance: the marriage allowance means you can transfer some of your personal allowance to your spouse if your income is less than the personal allowance (£12,570 in 2022-23).
Before you start filling out your tax return, it’s best to gather all of the information you’ll need.
Make Sure You Have Records Of:
–Your National Insurance number.
–Your UTR number.
-Accounts, invoices, receipts or other records of income.
-Records of any relevant expenses.
-Contributions to pensions or charities
– P60 and/or P45 forms.
Depending on your circumstances, you might need extra records, such as tenancy agreements.
Self-Assessment Tax Return Deadlines
Self-assessment tax is based on your income from the last tax year – not on the calendar year. The tax year runs from 6 April to 5 April, and your tax return will be due the following January. The self-assessment deadlines for your 2022-23 return are as follows:
- 5 October 2023: deadline to register for self-assessment for the first time
- 31 October 2023: paper tax return deadline
- 31 January 2024: online tax return deadline
- 31 January 2024: tax payment deadline for 2021-22 tax owed, plus any outstanding tax from 2020-21 if you took out a payment arrangement with HMRC. If you pay your tax by payments on account you may have already made payments towards this bill.
HMRC has the power to charge increasingly expensive penalties if you miss the tax return deadline, which starts with a £100 fine from the first day your return is late. If you don’t pay your tax by 31 January 2024, HMRC will charge you interest, set at the Bank of England base rate plus 2.5%.
Payment On Account
This may sound a bit confusing at first but I assure you it is pretty straight forward once you’ve got the hang of it.
So after filing in your first tax return and paying off your first year’s worth of tax, you will have to pay up roughly half of the bill again by 31 January, and the remaining half by the end of July the following year. This is called making a ‘payment on account’. It’s for the government to make sure you keep paying tax, in advance, and is merely estimating what you will likely owe. Dont worry though as HMRC will automatically minus those two payments on account from your final bill when you fill in your next self-assessment, and you can claim a refund if you overpay.
Why it’s better off for business owners to get an accountant?
Many business owners try to do their own tax returns to save money on their accountancy bills, however with all the work that comes with owning a business its normal that they lack time as well as a detailed understanding of all the tax rules and allowances they can lay claim to. Which is why its a lot easier to use a professional accountant that knows all those rules and regulations like the back of their hand.
Also tax regulations change all the time so whereas an accountant is always up to date with this, business owners might not always be aware so having an accountant can be a great help in avoiding errors during their tax return filings. Sole traders and other types of self employed may also be able to claim their accountant fees which your accountant will know more about.
All in all having an accountant on hand to help with your taxes and other accounting & business services is a great way of time & tax saving. In that way business owners can fully spend all their time and dedication towards their company’s needs.
Tax Returns If Your Circumstances Change
If your circumstances change, and you start earning untaxed income, you must let HMRC know by 5 October following the end of the tax year. It will then decide whether you need to complete a tax return. If you used to send a tax return but don’t need to any more(for instance, if you’re no longer self-employed), contact HMRC to close yourself-assessment account.
If you’re looking for further information, look no further than Cangaf Accountants. Contact us today for a free, no-obligation quote, and let us help you with all your accountant needs!
Have a relaxing day!! Till next time!😜
