In this blog, we will cover everything you need to know about the government’s self-assessment tax return requirements. We’ll cover the basics of registration and what you need to do to complete your annual return and pay your tax bill to avoid fines and penalties.
The blog is a bit long, so we’ve broken it down into the following manageable chunks:
- What is self-assessment
- When do I need to complete a self-assessment
- How do I register and then file a self-assessment
- What are the deadlines set by HMRC
- Are there any fines or penalties if I don’t meet a deadline
- Filing your return and paying your tax bill
- Payments on account
- What expenses can I claim on my self-assessment
- Making Tax Digital for Income Tax Self-Assessment (‘MTD for ITSA’)
- Useful links to HMRC guidance.
If you need more information, please follow the links to HMRC guidance at the end of this blog.
What is self-assessment?
Self-assessment is the way HMRC collects income tax and national insurance contributions (NICs) from certain taxpayers. These taxpayers must submit a self-assessment tax return to HMRC by 31 January after the end of each tax year. The tax year runs from 6 April to 5 April each year.
If you are employed, and your employer pays your income tax and NICs to HMRC under Pay As You Earn (PAYE) arrangements, you don’t normally need to submit a return unless you have other income which is not taxed at source or earn more than £100,000 from PAYE in a tax year.
When do I need to complete a self-assessment?
HMRC expects taxpayers to file a self-assessment if any of the following conditions are met in a tax year:
- You’re self-employed and your income was more than £1,000
- You’re a company director
- You earned £100,000 or more (including from PAYE)
- You had savings or investment income of more than £10,000 before tax
- You received income from abroad
- You earned more than £50,000 and claim child benefit
- You earned £2,500 or more in untaxed income, e.g. renting out a property
- You had profits from selling things like shares or a second home.
Of course, individual circumstances may vary. If you are in doubt, you should speak to HMRC directly to see if you need to submit a self-assessment. You should always seek advice from a tax professional or an accountant if you are in doubt.
How do I register and then file a self-assessment?
HMRC may contact you to say you should file a self-assessment. However, most people register themselves using the GOV.UK website when they know they have met any of the conditions highlighted above.
You need to register for self-assessment by 5th October after the end of the tax year you were required to file a return.
It’s relatively easy to register for self-assessment – you only need your national insurance number and some basic personal or business details HMRC will ask for.
HMRC will acknowledge your registration and send a Unique Taxpayer Reference number (UTR) in the post. You will see your personal UTR on any correspondence HMRC sends. You will need your UTR to set up your online tax account, which you can use to prepare and submit your self-assessment each year.
What are the deadlines set by HMRC?
Once you have registered for self-assessment you need to submit your return online each year by 31 January after the end of the relevant tax year. You will also need to pay any tax you owe by 31 January. The tax year ends on 5 April, so you have about 10 months to prepare and file your return and pay the tax you owe.
If you want to submit a paper return, the deadline for submission is 31 October each year.
Are there any fines or penalties if I don’t meet a deadline?
HMRC uses automated fines if you miss a filing deadline and will calculate additional penalties if you fail to submit your return. These are shown in the table below.
Late Filing Penalties
| Up to 3 months after 31 January | £100 |
| More than 3 months late | Further £10 per day up to maximum £900 |
| More than 6 months late | Further £300 or 5% of tax due (whichever is greater) |
| More than 12 months late | Further £300 or 5% of tax due (whichever is greater) |
| More than 12 months late and HMRC concluses taxpayer deliberately withholding information | Based on taxpayer behavior: – deliberate and concealed withholding 100% of tax due, or £300 if greater. – deliberate but not concealed 70% of tax due, or £300 if greater. |
Late Payment Penalties
| 30 days overdue | 5% of tax due |
| 6 months overdue | 5% of tax due at that date |
| 12 months overdue | 5% of tax due at that date |
New penalties are added on top of any accrued amounts. If you don’t file your return after missing the deadline by 12 months, HMRC may conclude you are deliberately withholding information and assess your tax due using its own estimates.
Filing your return and paying your tax bill
Most taxpayers file their self-assessment online using their online tax account. Your online tax account is also known as your ‘Government Gateway account. If your tax affairs are relatively straightforward, the HMRC online system is easy to use. However, if you have multiple sources of income, or are looking to reduce your tax bill by claiming any allowances or expenses, you should consult with a tax specialist or an accountant.
You will need to keep accurate records of your income, any expenses you are looking to set against such income, and any allowances you are looking to claim. HMRC may ask to see evidence of these if they decide to check your return.
You will need the following information before you can start preparing your return:
- National insurance number
- Ten-digit unique taxpayer reference (UTR)
- Details of any untaxed income from the relevant tax year, be it from self-employment, interest on savings, dividends from shares, or renting out property
- Your P60 or other records showing what tax you have already paid on your income
- Total of expenses relating to self-employment that can be deducted to work out your taxable profit
- Evidence of any charitable or pension contributions made in the tax year.
When you are ready to file your return, HMRC will calculate the amount of tax you owe. You can pay the amount using your online bank account or through a bank transfer. You can also use HMRC’s telephone banking service or pay the amount you owe using a paying-in slip at your bank.
You must ensure you leave sufficient time for your payments to clear the banking system. This can take up to five working days.
Payments on account
If you are self-employed, HMRC will ask you to make a payment on account in lieu of your annual tax bill. The calculation estimates the income tax and NICs you should pay based on half of your previous year’s tax bill. Payments on account must be paid by 31 July and 31 January each year.
If you owe more than the total of your payments on account on 31 January, you will need to pay the additional amount you owe on that date. If your tax bill is less than the amount you owe, for instance, if your income was less than HMRC calculated for the tax year, HMRC will refund the excess amount you paid on account.
If you know your income will be reduced in a tax year, you can ask HMRC to reduce your payments on account. You can do this using your online tax account or by writing to HMRC.
What expenses can I claim on my self-assessment?
All expenses you claim must be wholly and exclusively for the purposes of your employment or business. You cannot claim day-to-day expenses you pay in the course of your personal life. While you don’t need to send evidence to support your expenses when you file your self-assessment, you need to keep records of your expenses for five years in case HMRC asks to see them.
Making Tax Digital for Income Tax Self-Assessment (‘MTD for ITSA’)
From 6 April 2024, businesses with self-employed people (ie. sole traders) and landlords will need to follow HMRC’s rules for MTD for ITSA. This means affected taxpayers must:
- operate MTD in relation to their trading and property income which is chargeable to income tax and Class 4 NICs if their gross income from these sources for a tax year exceeds £10,000
- keep their records digitally (for MTD purposes only), by providing digital quarterly updates and providing their ITSA return information to HMRC through MTD compatible software.
Where a taxpayer falls into the MTD ITSA regime, they will need to use MTD-compatible software to:
- keep digital records and submit quarterly reports to HMRC (‘business updates’)
- complete a year-end reconciliation (an end-of-period statement similar to a set of accounts) and send it to HMRC each year
- Complete a final submission and update process which will follow the current self-assessment tax return filing arrangements with HMRC.
It is worth speaking to an accountant about the software you will need to use to ensure you meet HMRC’s requirements to file information digitally.
You can find out more about MTD for ITSA in our blog. (Link given Below)
MTD for ITSA: Why You And Your Clients Should Be Preparing Now?
Useful links to HMRC guidance:
You may find the following links to HMRC guidance to be useful.
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