Self-assessment is a system HMRC uses to collect tax from individuals whose income isn’t automatically taxed at the source.
Instead of your employer handling tax, you’re responsible for reporting your income and calculating the tax you owe.
While self-assessments are traditionally associated with the self-employed, they apply to a much wider range of situations than many assume.
That catches a lot of people out. It’s part of the reason why an astounding 1.1 million people in the UK missed their self-assessment deadline, leaving themselves vulnerable to fines.
So, whether you’re a freelancer juggling multiple gigs and side hustles, a landlord with rental income, a company director, or need to report income from a trust, this guide is for you.
We’ll walk you through who needs to file a self-assessment, when to do it, and how to avoid common mistakes.
What Actually Is Self-Assessment and What’s Its Purpose?
The self-assessment system is used by HMRC to collect tax from people whose income isn’t entirely taxed at the source. But what does that really mean?
In essence, self-assessment is your way of telling HMRC about your income and calculating the tax you owe.
Unlike employees who have tax automatically deducted from their salaries through PAYE, those who need to file a self-assessment return are responsible for reporting their own income and working out their tax bill.
The purpose is twofold:
- To ensure everyone pays the right amount of tax: Self-assessment allows HMRC to collect tax from income that isn’t automatically taxed, like profits from self-employment or rental income.
- To give individuals more control and responsibility: It puts the onus on you to report your income accurately and claim any relevant allowances or reliefs.
Self-assessment isn’t just about paying more tax. In many cases, it can help you claim back tax you’ve overpaid or access tax reliefs you’re entitled to. It’s a way to ensure your tax affairs are in order and that you’re paying exactly what you should – no more, no less.
The system covers various types of income, from self-employment earnings and rental profits to certain savings and investment income.
It also allows you to claim tax relief on things like charitable donations or pension contributions.
Who Needs to File a Self-Assessment Tax Return?
Understanding whether you need to file a self-assessment tax return isn’t always straightforward.
While many associate it with self-employment, there are many other circumstances and scenarios that require you to file.
Let’s break down the most common situations when you’ll need to file a self-assessment:
The Most Common Reasons for Filing Self-Assessment
You might be surprised at how diverse this group is. If you fall into any of these categories, you’ll more than likely need to submit a self-assessment tax return:
- Self-employed and sole traders: If you’ve earned more than £1,000 from self-employment in a tax year, you’ll need to report this income through self-assessment.
- Business partners: As a partner in a business, you’re responsible for paying tax on your share of the partnership’s profits. Self-assessment is how you report this income.
- Company directors: Even if you’re not taking a salary from your company, you still need to file a return to report any dividends or benefits you receive.
- Landlords: If your rental income exceeds £2,500 before expenses, you’ll need to declare it through self-assessment. This includes income from property abroad or holiday lets.
- High earners: Those with an annual income over £100,000 must file, regardless of whether all taxes have been paid through PAYE. This is because you may need to repay some or all of your personal allowance.
- Investment income: If you receive £10,000 or more from savings, investments, or dividends, you’ll need to report this through self-assessment.
- Foreign income: Any income from overseas that’s taxable in the UK needs to be declared. This could include foreign investments, property rental, or income from work abroad.
- Capital Gains: If you’ve sold assets like shares, a second home, or valuable possessions and made a profit, you may need to pay Capital Gains Tax and report this through self-assessment.
The Not-So-Obvious Cases
Tax isn’t always straightforward, and there are numerous less obvious circumstances that might require you to file. Again, this will probably surprise some people.
You may need to submit a self-assessment if:
- Child Benefit high earners: If you or your partner receive Child Benefit and either of you earn over £60,000, you’ll need to file to repay some or all of the benefit through the High Income Child Benefit Charge.
- Pension contributions: To claim additional tax relief on pension contributions beyond what your pension provider has already claimed, you’ll need to use self-assessment.
- Trustees: If you’re a trustee of a trust or registered pension scheme, you’re responsible for reporting the trust’s income and paying any tax due through self-assessment.
- Trust income recipients: If you receive income from a trust or settlement, you may need to report it through self-assessment, especially if tax is due on it.
- Claiming specific reliefs: Certain tax reliefs, such as Enterprise Investment Scheme (EIS) relief or Venture Capital Trust relief, can be claimed through self-assessment.
Key Dates and Deadlines For Self-Assessment
There are quite a few dates you’ll need to be aware of when it comes to self-assessment. It’s important to be aware of them, as being late or otherwise missing deadlines can cost you.
- 5 October: This is the deadline for registering for self-assessment if you’re newly self-employed or have a new source of income that requires you to file a return.
- 31 October: If you prefer to submit a paper tax return, this is your deadline. It’s earlier than the online deadline to give HMRC time to process paper returns.
- 30 December: This is an important date if you want HMRC to collect tax through your PAYE tax code, where possible. You’ll need to submit your return online by this date and owe less than £3,000.
- 31 January: This is the big one. It’s the deadline for online tax returns and for paying the tax you owe. It’s also when your first payment on account for the next tax year is due, if applicable.
- 31 July: Six months after the January deadline, this is when the second payment on account is due, if you’re required to make these advance payments.
Remember, these dates refer to the tax year that ended the previous April. For example, for the 2023/24 tax year (which runs from 6 April 2023 to 5 April 2024), the online filing deadline would be 31 January 2025. Don’t let this catch you out if you’re new to the self-assessment system!
What Are Payments on Account?
If your tax bill is over £1,000, HMRC will ask for payments towards your next year’s bill.
These are called ‘payments on account’ and are made in two instalments – on 31 January and 31 July.
Each payment is half of your previous year’s tax bill. This system helps spread the cost of your tax but can catch new filers off guard, so it’s important to budget for it.
Preparing For and Filing Your Self-Assessment
Getting ready for your self-assessment doesn’t have to be a headache. Here’s a handy checklist to guide you through the process, from preparation to filing.
You can run through these tasks one by one, ticking them off as you go. Feel free to print this out and keep it nearby as you work on your tax return.
| Task | Explanation | Done? |
| Preparation | ||
| Determine whether you need to submit a self–assessment | The most important stage. Self-assessments apply to a wide range of people, so be proactive in identifying whether you need to file one. | □ |
| Record all income sources | Track every pound earned, including self-employment, investments, rental income, and other income not taxed at source. | □ |
| Log business expenses | Keep a detailed record of all costs related to your business activities | □ |
| Organise financial documents | Save and categorise receipts, invoices, and bank statements for easy reference | □ |
| Understand allowable expenses | Research which expenses you can deduct to reduce your taxable income | □ |
| Budget for tax payments | Set aside 20-30% of your income to cover potential tax liabilities | □ |
| Filling Out Your Return | ||
| Compile necessary information | Gather all financial records, National Insurance number, and relevant UTR | □ |
| Complete form sections | Carefully fill out each applicable part of the self-assessment form | □ |
| Review for accuracy | Double-check all figures and information to avoid errors and potential penalties | □ |
| Submit your return | File your completed form before the deadline (31 Jan for online, 31 Oct for paper) | □ |
| Pay your tax bill | Settle any tax owed by the payment deadline (usually 31 January) | □ |
Remember, thorough preparation will make the actual filing process much smoother. Don’t hesitate to seek professional advice if you’re unsure about any part of the process. This will be especially advantageous if your income or tax affairs are complex.
Double Point offers self-assessment tax return assistance to help you create and submit your tax return, including maximising reliefs and expenses you can use to reduce your tax bill.
What If You Can’t Pay Your Self-Assessment Tax?
If you’re struggling to pay your tax bill, don’t panic. Contact HMRC as soon as possible.
They may be able to offer a Time to Pay arrangement, allowing you to spread your payments over a longer period.
How Double Point Can Help
Self-assessment is a flexible system. Different rules apply to different people and situations, and if your taxes are particularly expensive, it can be challenging to tackle alone.
At Double Point, we specialise in making the self-assessment process smooth and stress-free for our clients. Here’s how we can help:
- Expert guidance: Our team of chartered accountants stays up-to-date with the latest tax laws and regulations. We can provide personalised advice for your specific situation.
- Comprehensive service: From registration to filing, we can handle every step of the self-assessment process for you. We’ll ensure all deadlines are met, and every detail is accurate.
- Maximising tax efficiency: We’ll review your finances to identify all allowable expenses and applicable tax reliefs, potentially reducing your tax liability.
- Year-round support: We offer ongoing support to help you maintain accurate records throughout the year, making future self-assessments even easier.
- Peace of mind: With Double Point managing your self-assessment, you can focus on your business or personal affairs, confident that your tax matters are in expert hands.
For more information, book a consultation with us at Double Point today to discover how we can streamline your self-assessment tax affairs.
