Not everyone needs to submit a Self Assessment tax return, but if you are required to, it’s crucial you understand what you need to do and when – starting from registering for Self Assessment.
Getting it right helps you pay the right amount of tax and submit information to HM Revenue & Customs (HMRC).
If you don’t, you run the risk of having to pay financial penalties as well as settling overdue tax and any related interest payments.
What is Self Assessment?
Self Assessment is HMRC’s way of collecting tax on income that isn’t taxed at source. For example, if you earn money from an employer who pays your wages then they’ll normally deduct the tax you owe before paying you (so you’re literally being taxed at the source of your funds).
If you earn money a different way, then you might need to report this income to HMRC by submitting Self Assessment tax returns so that the right amount of tax can be collected from you.
Who needs to register for Self Assessment?
You should register for Self Assessment if any of the following criteria apply to you:
- You’re self-employed (part-time or full-time)
- You’re a partner in a partnership
- You receive dividend payments (for instance, because you’re a director in a company you own)
- You earn significant income through savings and/or investments
- You earn income through property (i.e., rentals)
- You need to pay Capital Gains Tax
Falling into any of these categories means you’re generating income that isn’t taxed at source in the same way employment earnings are. As a result, you’ll need to report your income to HMRC through a Self Assessment tax return and pay personal Income Tax and National Insurance contributions on your earnings.
How much tax will I pay through Self Assessment?
The amount of tax you pay depends on how much earn during the tax year. If you work for an employer, you’ll be taxed throughout the year.
Any additional income you receive will be added to your total earnings to work out which tax rate you fall under (but you won’t pay tax on your employment income again – it’s just used for the tax rate calculation!).
The Income Tax rate bands for 2023/24 are:
- Basic rate, 20% – on income up to £50,270
- Higher rate, 40% – on income between £50,271 and £125,140
- Additional rate, 45% – on income over £125,140
The Personal Allowance means you don’t have to pay any Income Tax on the first £12,570 you earn in a tax year.
Should you show your PAYE income on your tax return?
Yes, if you have a salaried job but you also have additional income or taxable benefits from self-employment, you will need to detail your PAYE earnings on your Self Assessment tax return.
You’ll need to fill out a separate section for each employment, but you won’t pay tax on any money that’s already been taxed.
Do you need to submit Self Assessment for a side hustle?
It’s becoming more and more common for people to have side hustles – selling goods or services outside of the work they do for an employer. It’s an increasingly popular way to make extra money, and to get started in self-employment whilst keeping the safety net of a paid role.
Depending on how much you earn from it, you might need to register for Self Assessment and tell HMRC about your side-hustle.
The Trading Allowance means you can earn up to £1,000 from self-employment in a tax year before needing to register for Self Assessment and pay tax on your trade earnings. Once you start earning more than this, you’ll need to start submitting a return and paying tax bills.
How to register for Self Assessment
1. Create a Government Gateway account on the HMRC website if you don’t already have one. This gives you access to the government’s online tax services.
2. Sign into your online account to register for Self Assessment
3. Once registered, you’ll receive your Unique Taxpayer Reference (UTR) number within 10 working days (this identifies your tax records, and you’ll need it to submit your tax return).
Important Self Assessment deadlines
Depending on whether you choose to file your Self Assessment tax return online or by post, there are set deadlines you need to be aware of.
- Submit a paper tax return by 31st October following the end of the tax year being reported
- If you prefer to submit online, you have until 31st January – a further three months
Payments on account
If your tax bill is more than £1,000, or if less than 80% of your tax is collected through PAYE, HMRC will ask you to make advance payments towards next years’ tax bill.
Known as payments on account, you’ll need to make two instalments based on your current tax bill.
- First instalment, 50% of the prior year’s tax bill: 31st January following the end of the tax year being reported – the same deadline as the previous tax year
- Second instalment, 50% of the prior year’s tax bill: 31st July of the same year.
If the advance payments on account don’t cover that year’s tax bill once you submit your tax return, you’ll also need to make a final balancing payment to cover the additional amount.
Do I need an accountant for my Self Assessment tax return?
No, it isn’t a legal requirement to get a professional accountant to file your Self Assessment tax return for you. However, there are a whole host of benefits to enlisting the services of a qualified expert.
- Timesaving: Putting your tax return in the capable hands of an accountant will speed up and streamline the process so you can tick it off your to-do list sooner. They do these far more often than you do!
- Accuracy: Taxes and expenses can be tricky to navigate when it’s not your forte, which inevitably leaves more room for error. Having an accountant help with your tax return reduces the risk of mistakes being made and you getting into trouble with HMRC.
- Tax efficiency: They will be able to ensure that you’re running as tax-efficiently as possible, not just compliantly, and make sure you’re saving money and claiming relief wherever possible.
- Knowledge: An experienced accountant will know what they’re doing and will be able to use this to your advantage, giving you more confidence in your financial decisions.
- Peace of mind: All of the above benefits combined give you invaluable peace of mind, so you can simply focus on doing what you do best.
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