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THE ULTIMATE GUIDE TO SELF ASSESSMENT


9 min read

Completing a self assessment tax return needn’t be the scary task some make it
out to be. With careful planning and the help of this guide, you’ll get through
it more easily than you thought. Here we take a closer look at why you might
need to fill out a self assessment tax return, how to complete one, and the key
dates to keep in mind.

Updated: 01/01/2022




CONTENTS

If you're looking for specific information just click on one of the items below
to take you directly to that section.

 * What is a self assessment tax return?
 * Who needs to complete one?
 * When are the tax return deadlines?
 * How do you register for self assessment?
 * How do you fill in your tax return?
 * How do you pay any tax you owe?
 * What if you have no tax to pay?
 * What’s the penalty for late payment?


WHAT IS A SELF ASSESSMENT TAX RETURN?

A self assessment tax return is a document you send to HMRC? declaring how much
tax you have to pay.

If you’re employed, tax is automatically deducted from your salary by your
employer through Pay as you Earn (PAYE). However, it is not just the
self-employed who need to complete an annual self assessment tax return. If you
earn extra income through another means, this may apply to you as well.


WHO NEEDS TO COMPLETE ONE?

In some cases, you could be contacted by HMRC saying you need to submit a form.
However, you could also have to file a tax return if:

 * Your annual income is £100,000 or more
 * You have income from property
 * You have earned £10,000 or more in income from savings or investments
 * You're a company director
 * Your income is over £50,000 and you claim child benefit
 * You have capital gains tax to pay
 * You need to claim expenses or reliefs
 * You get income from overseas, from trusts, settlements, or estates
 * You previously worked abroad
 * You're a trustee


YOUR ANNUAL INCOME IS £100,000 OR MORE

Once you are earning £100,000 or more, you start to lose entitlement to your
personal tax-free allowance, which decreases by £1 for every £2 earned. For this
reason, you will need to fill in a self assessment tax return. 


YOU HAVE INCOME FROM PROPERTY

As a landlord, you get £1,000 rental income tax-free each year. If your rental
income is between £1,000 and £2,500 for the tax year you must contact HMRC and
if it is more than £2,500 you must fill in a self assessment form.


YOU HAVE EARNED £10,000 OR MORE IN INCOME FROM SAVINGS OR INVESTMENTS

You have a personal savings allowance, which is the amount of interest you can
earn on your savings without paying tax (£1,000 for basic rate taxpayers, £500
for higher rate, and £0 for additional rate).

You also have a personal allowance, which is the amount of income you do not
have to pay tax on (currently £12,570, although this may be used up by your
earnings from your job). If you exceed these allowances and your savings and
investment income is £10,000 or more before tax, you will need to self assess.


YOU'RE A COMPANY DIRECTOR

As a company director, you need to self assess if you receive dividends? or any
other untaxed income — such as foreign income or rent — in addition to your PAYE
director’s salary. You must also fill in a tax return if you are a director
repaying a student loan outside of your PAYE or receiving child or bereavement
benefit.


YOUR INCOME IS OVER £50,000 AND YOU CLAIM CHILD BENEFIT

Child benefit tapers off when you’re earning between £50,000 and £60,000. Rather
than the government reducing the benefit, you become liable for a High Income
Child Benefit Charge and will have to fill out a self assessment form to find
out how much you need to pay back.

If your partner also earns over £50,000, then whoever has the higher income will
be responsible for paying the charge.


YOU HAVE CAPITAL GAINS TAX TO PAY

If you have made a profit on the sale of an asset, you are subject to capital
gains tax (CGT) and will need to complete a self assessment form. This applies
to any personal possession worth over £6,000 (excluding your car), property
that’s not your main home or your main home if it has been let out, used for
business or is ‘very large’.

In addition, you get charged CGT on shares that are not in an Individual Savings
Account (ISA) or Personal Equity Plan (PEP), or business assets. If you own
cryptocurrency, HMRC treats this like shares so it is subject to CGT. You can
even register capital losses on your self assessment so that these can be offset
against current or future capital gains.


YOU NEED TO CLAIM EXPENSES OR RELIEFS

Certain expenses can be exempt from tax — the working from home tax relief
scheme during the covid lockdown, for instance, which allowed people to claim
relief on some additional household costs. Filling out a self assessment form
could reduce your tax bill as a result. Alternatively, you can claim this tax
back on the HMRC portal. 

In addition, there are some situations where higher earners need to fill in a
tax return to claim their full entitlement to a higher rate of tax relief. For
example, some workplace pension providers will only claim the first 20% for you.


YOU GET INCOME FROM OVERSEAS, FROM TRUSTS, SETTLEMENTS, OR ESTATES

Although some income might be tax-free, you have to declare overseas income or
capital gains when it is more than £2,000 — even if you have already been taxed
on it abroad.


YOU PREVIOUSLY WORKED ABROAD

Your residency status in the UK and whether you worked in a country that has a
double taxation treaty with the UK are the main reasons why having worked abroad
could mean you need to self assess. For example:

 * If you previously worked in a country that has a double taxation treaty with
   the UK then you can claim back some or all of the tax depending on the
   treaty.
 * If you are now working here as a UK resident you will normally pay UK tax on
   all of your income, whereas non-residents pay tax only on their UK income so
   filling in a self assessment tax return helps HMRC to work out whether you
   have been taxed correctly.


YOU'RE A TRUSTEE

Trust income is taxable, so trustees must make sure they file a tax return each
year.


WHEN ARE THE TAX RETURN DEADLINES?

 * 31 January - completing a tax return online for the previous tax year.
 * 31 January - settling any remaining payments (known as a balancing payment)
   for the previous tax year.
 * 31 January - making a first payment on account for the new tax year.
 * 31 July - making a second payment on account for the new tax year.
 * 5 October - registering for for the new tax year.
 * 31 October - completing a paper tax return for the previous tax year.
 * 30 December - completing your tax return online for the previous tax year and
   opting for payments to be taken through PAYE (if you owe less than £3,000).

You have up until midnight on these dates, but to avoid stress (and any
technical issues) it's best not to leave it until the very last minute.


HOW DO YOU REGISTER FOR SELF ASSESSMENT?

You need to register with HMRC to be able to complete a tax return if you
haven't before - to register for the first time click here or call 0300 200
3610.

You will need your National Insurance number, contact details and details of
workplaces to get started. Once registered you will be given a Unique Taxpayer
Reference (UTR) number which you will be able to use for future tax returns.

If you don’t register before 5 October, contact HMRC straight away. You may have
to pay a penalty — the amount is determined by HMRC's view as to what extent you
deliberately 'failed to notify'.

Once you have registered you can complete your tax return by paper or online.


HOW DO YOU FILL IN YOUR TAX RETURN?

You can find the latest notes and guidance from HMRC here to help you fill in
your tax return. These can help explain the documents you need and the tax you
may be liable for. There are also videos available to watch here.

It’s good practice to make provision for any tax owed on an ongoing basis - it
will be much easier to fill in your tax return if you keep good records as you
go along rather than trying to find all your bank statements and receipts at the
last minute.

Depending on the complexity of your finances, you may want to consider employing
an accountant to prepare and complete tax returns for you. This will cost
between £50 (budget online company) up to around £250 (high street accountant)
although this varies per region and level of expertise.


PAPER TAX RETURNS

Paper self assessment tax return forms must be sent in time to be received by
HMRC by 31 October each year. Forms are available on the HMRC website or can be
requested by post or over the phone.


ONLINE TAX RETURNS

To be able to complete your self assessment tax return online you need to create
an HMRC online account and apply for an activation code (this is different from
registering for self assessment itself).

If you haven't completed your tax return online before it may take up to 20 days
to create an account from start to finish. If you have sent a return before, use
the online account you set up previously to file your tax return again (you will
need your UTR number).

To send your tax return online, you can either use the HMRC free online service
or buy commercially available software.

When following the online process, your tax is calculated automatically as you
fill in the return.


HOW DO YOU PAY ANY TAX YOU OWE?


PAYMENT DEADLINES

On 31 January you need to pay the balance of any tax you owe for the previous
tax year. This is called a 'balancing payment'. You are likely to have already
made two payments previously (see below).

The end of January also sees self assessment taxpayers whose previous year's tax
came to more than £1,000 having to pay the first half of what's called a
'payment on account' for the tax year ending the following 5 April. This is half
of the total expected tax due based on what you earned and paid in tax the
previous tax year.

The deadline for your second payment on account is 31 July each year. Come 31
January, you will settle any remaining tax owed.

HMRC will usually send you a self assessment statement that shows how much you
owe. You can also check your tax bill online.


PAYMENT METHODS

The HMRC self assessment statement contains payment details. Be aware of the
amount of time needed to make a bank transfer, as well as how much money your
bank will allow you to transfer in a single online transaction.

You can also pay by other means, such as Direct Debit or Bacs, but again, be
aware of the timescales you need to allow to make the deadlines. Another option
is to pay by instalments if you wish to spread the cost.

If you pay tax through your job and file a tax return, you can opt to have the
tax taken through PAYE. To do this, you must complete your tax return by 30
December each year.

You can learn more about payment methods on the gov.uk website.


WHAT IF YOU HAVE NO TAX TO PAY?

Even if you don't have any tax to pay, or you've already paid it, you should
still send a tax return if required.


WHAT’S THE PENALTY FOR LATE PAYMENT?

The penalty is £100 if your tax return is up to three months late and you will
be charged interest. If you are later than this, or your payment is delayed, the
fine will be bigger.


Discover more about…
Investing


Savings


Tax


Do you need to complete a tax return?
Income tax explained
Tax on savings
Tax Relief on Pension Contributions



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