In the UK, everyone who earns income must pay tax. But how do you know if you need to file a Self Assessment Tax Return? Many people are unsure whether this applies to them. In this blog, we will explain who needs to file a Self Assessment Tax Return, why it is important, and when you need to do it. We will also answer common questions to make it easier for you to understand.
What is a Self Assessment Tax Return?
A Self Assessment Tax Return is a form you fill out every year to tell HMRC (Her Majesty’s Revenue and Customs) how much money you earned. This helps HMRC figure out how much tax you need to pay.
Most people pay tax through their salary. This is called “Pay As You Earn” (PAYE). The tax is automatically taken from your pay each month. But some people must fill out a Self Assessment Tax Return to ensure they pay the right amount of tax.
If you need to file a Self Assessment Tax Return, you must report all your income, including money from jobs, self-employment, savings, and other sources. You might also need to report any business expenses you want to claim back.
Who Needs to File a Self Assessment Tax Return?
There are different groups of people who must file a Self Assessment Tax Return. Let’s look at the most common ones.
1. Self-Employed People
If you are self-employed or run your own business, you need to file a Self Assessment Tax Return. This includes people working as freelancers, contractors, or sole traders.
When you are self-employed, you are responsible for paying your own tax and National Insurance. This means you need to report your income and any expenses on your tax return. You can also claim back some of your business expenses, like travel costs, office supplies, and tools.
2. People with Rental Income
If you earn money from renting out a property, you might need to file a Self Assessment Tax Return. This includes both residential and commercial property owners.
Even if you don’t make much profit, if your income from renting is above a certain limit, you must tell HMRC. You will also need to report expenses like repairs, maintenance, or mortgage interest.
3. People with Additional Income
If you have income from other sources, such as investments, dividends, or pensions, you might need to file a Self Assessment Tax Return. This includes:
- Money from savings or investments
- Income from dividends (if you own shares)
- Pension income not taxed through PAYE
- Rental income from property
- Income from abroad
If you have any of these types of income, you must report them on a Self Assessment Tax Return.
4. Company Directors
If you are a director of a limited company, you may need to file a Self Assessment Tax Return. Even though your company pays taxes on its profits, you still need to report your income from the company.
For example, if you get a salary or dividends from your company, you must report this on your personal tax return. You still need to file a tax return, even if the company isn’t making a profit.
5. High Earners
If you earn more than a certain amount, you may need to file a Self Assessment Tax Return, even if you don’t fall into one of the other groups listed above.
For example, if you earn more than £100,000 each year, HMRC may ask you to file a tax return. People who earn more money often have more complex tax matters, like extra income from investments or businesses.
6. People Who Receive Child Benefit
If you or your partner receive child benefit and your income is over £50,000 a year, you may need to file a Self Assessment Tax Return. This is because of the High Income Child Benefit Charge (HICBC), and you need to report this charge on your tax return.
7. People with Capital Gains
If you make money from selling assets like property, stocks, or shares, you may need to pay Capital Gains Tax. If your total gains exceed a certain amount, you will need to file a Self Assessment Tax Return.
This also applies to people who sell a second home or valuable items like art. You can report your gains and any costs on your tax return.
8. People Who Have Previously Filed a Tax Return
If you have filed a Self Assessment Tax Return in previous years, you must continue filing it unless HMRC tells you that you no longer need to do so. HMRC might also send you reminders if they need a tax return from you.
9. People with Overseas Income
If you earn money from abroad, you might need to file a Self Assessment Tax Return. This applies to people living in the UK who earn income from other countries. You must report this income, even if it was already taxed in the country where it came from.
If you are not sure about whether you need to pay tax on foreign income, it is a good idea to talk to an accountant or tax expert.
Why Do You Need to File a Self Assessment Tax Return?
Filing a Self Assessment Tax Return is important for several reasons:
To Report Your Income: It helps you report all your income to HMRC, including income from jobs, self-employment, investments, and more.
To Pay the Right Amount of Tax: If you are self-employed or have other sources of income, filing a tax return ensures you pay the right amount of tax.
To Claim Expenses: If you are self-employed, you can claim business expenses. This can lower your tax bill.
To Avoid Fines: If you are required to file a tax return and you don’t do it, you might face penalties from HMRC.
Key Dates for Filing a Self Assessment Tax Return
It is very important to know the deadlines for filing your Self Assessment Tax Return. The UK tax year runs from April 6 to April 5 of the following year. Here are the main deadlines:
October 5: If you are self-employed, you must register with HMRC by October 5 to file a tax return for the current year.
January 31: This is the deadline to file your Self Assessment Tax Return online. You also need to pay any tax you owe by this date.
October 31: If you file a paper tax return, this is the deadline for submitting it to HMRC.
How to File a Self Assessment Tax Return
Filing a Self Assessment Tax Return is simple once you have all the information you need. You can file it online through the HMRC website, or you can choose to fill out a paper return if you prefer.
Here’s how to file your return:
Register with HMRC: If this is your first time filing, you must register with HMRC to get your unique taxpayer reference (UTR).
Collect Your Information: Get all the details about your income and expenses. This could include payslips, bank statements, invoices, and receipts.
Fill Out the Form: Log in to the HMRC website and fill out the form online. If you have questions, you can ask an accountant for help.
Submit the Form: Once the form is complete, submit it online or by post. Make sure to pay any tax owed by the deadline.
Conclusion
Filing a Self Assessment Tax Return is a key part of paying taxes in the UK. If you are self-employed, have other sources of income, or have other special situations, you will need to file a tax return each year. By understanding who needs to file and when to do it, you can avoid fines and make sure you pay the right amount of tax. If you are unsure whether you need to file a Self Assessment Tax Return, it’s always a good idea to talk to a tax expert or accountant who can help guide you through the process.
FAQs About Self Assessment Tax Return in the UK
1. Who needs to file a Self Assessment Tax Return?
You need to file a Self Assessment Tax Return if you are self-employed, have additional income, are a company director, or if your income is over £50,000 and you receive child benefit.
2. When is the deadline to file my Self Assessment Tax Return?
The deadline to file online is January 31. If you file on paper, the deadline is October 31.
3. What happens if I miss the deadline?
If you miss the deadline, you could be fined. The fine starts at £100 and increases the longer you wait.
4. Can I get help with my Self Assessment Tax Return?
Yes, you can get help from an accountant or a tax expert if you find the process difficult.
5. Do I need to file a Self Assessment Tax Return if I am employed?
You don’t need to file if you only have income from your job, but you do need to file if you have other income, like rental income or self-employment income.