What is Self Assessment?
You tell HMRC about your taxable income and gains for a tax year by completing a Self Assessment tax return. Part of the process is to work out and pay what you owe.
When do I have to complete a Self Assessment tax return?
You must fill in a tax return if HMRC have sent you a ‘notice to file’ asking you to do so. This is the case unless HMRC agree to cancel the return.
If you receive any untaxed income, you might need to complete a tax return.
Common situations are:
- you are self-employed (unless this income is within the annual £1,000 trading allowance)
- you are a partner in a business
- you are a company director and have income on which tax is due that is not taxed under Pay As You Earn (PAYE)
- you have property income – for example, you are renting out a room, a garage or a whole property to someone else (unless this income qualifies for rent-a-room relief or is within the annual £1,000 property allowance)
- you want to claim tax relief on employment expenses over £2,500 in a year
- you have to pay a tax charge on your child benefit, known as the high income child benefit charge
- you have untaxed savings income. HMRC might be able to collect any tax due on small amounts without you doing a full tax return, but should always tell them about savings income of more than £1,000 a year (or £500 if you pay tax at the higher rate) and dividends of more than £2,000 a year
- you have capital gains tax to pay which hasn’t already been paid in-year
Selling a property?
If you are a UK resident and sell a UK residential property and you have capital gains tax to pay after 5 April 2020, you have to tell HMRC and pay the tax within 60 days (30 days for disposals which complete on or before 27 October 2021). Similar rules apply to non-residents selling any UK land or property, even if there is no tax to pay.
Do I have to complete a Self Assessment tax return if I have no tax to pay?
As we highlight above, you must submit a tax return if HMRC have asked you to and they have not cancelled or withdrawn that requirement. This is regardless of your circumstances.
If HMRC have not asked you to file a tax return for a year, then you might have a separate legal duty to notify them that you are liable to income tax, capital gains tax, or Class 2 or 4 National Insurance. This is so that they can issue you with a tax return to complete, or otherwise collect the amounts due some other way. However, there are a number of exceptions to this obligation to notify – for example, where all of your income was taxed under PAYE and you had no chargeable gains.
GOV.UK has a tool whose aim is to tell you if you need to send a Self Assessment tax return to HMRC.
For example, if you are self-employed and have turnover of more than £1,000 then the tool states that you need to send HMRC a tax return. However, there is a view that the legal requirement to notify HMRC of liability to income tax, capital gains tax or Class 2 or 4 National Insurance cannot apply if there is no liability – in other words, where you do not owe anything to HMRC. This is a different view to HMRC’s position set out in the GOV.UK tool.
How do I register for Self Assessment?
You must usually register with HMRC for Self Assessment by 5 October following the end of the tax year in which the income or gains first arose, otherwise penalties may be applicable. You will need to setup a Government Gateway Account (see our blog on this!!) and add Self-Assessment as a tax.
What information do I need to complete my tax return?
Your tax return for any tax year must contain details of all that year’s taxable income and gains. Here are some typical things you might need:
|✔️||Details of self-employment income and expenses to work out your trading profit or loss for the year|
|✔️||Details of property income and expenses to work out your rental profit or loss for the year|
|✔️||Employment and pensions income information, including forms P60, P11D and P45 from any jobs you have had|
|✔️||Interest certificates from banks or building societies|
|✔️||Details of pension contributions made to relief at source schemes|
|✔️||Details of any chargeable capital gains made in the year|
You need to keep records of your taxable income and gains to be able to complete the tax return. You do not have to send original documents to HMRC, but if HMRC ask questions later, you might need them as back-up and to show you took reasonable care to get your return right.
For self-employed and property income, you need to be able to show how you have worked out your profit.
So, you need to keep things like:
- invoices (bills) for work you have done
- receipts for expenses paid
- bank statements
- statements from letting agents (or details of rental income for property if you do not use an agent)
- information showing how you have taken account of any private use of things used in the business (for example, mileage logs for a vehicle used both in the business and privately).
When do I pay the tax due and what payment options are there?
Usually Self Assessment payments (which can be made up of tax, National Insurance and student loan repayments) are due by 31 January following the end of the tax year to which they relate. So tax due for the 2021/22 tax year is due for payment by 31 January 2023.
Some taxpayers need to make instalment payments towards their annual Self Assessment bill for the following year.
These are called payments on account. Generally speaking, if you come within the payment on account regime you will need to make payments on 31 July in each tax year as well as on 31 January.
What if I can’t pay the tax due?
If you are having difficulty meeting a tax bill or know that you will have difficulty paying a bill that becomes due in the near future, you should contact HMRC as soon as possible.
HMRC can allow you to spread payments over a period of months depending on your personal circumstances and what you can afford to pay.
If you agree with HMRC to spread your payment over a period of time and stick to it, you should not be charged late payment penalties.
If you call HMRC on their Self Assessment helpline (0300 200 3310, textphone 0300 200 3319) the adviser will either deal with your query or arrange for a call back from a specialist adviser.