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Everyone will be expected to know:
- Overview of Self-assessment
VIDEO- Short Q&A on self-assessment
Self-Assessment involves completing an online or paper tax return. A person tells HMRC about their income and capital gains (profits on the sale of certain assets) on the tax return. The person may also claim tax allowances or reliefs via the tax return. There are deadlines for sending the tax return in - and penalties and interest charges if it arrives late.
If a person is just starting self-employment they should notify HMRC within 3 months of starting self-employment. There are penalties for failure to notify.
HMRC normally sends out the Self-Assessment tax return in April each year. If a person hasn’t completed a tax return before (or it's been a while since they did), they need to complete a Self-Assessment registration form before they can get a tax return. They'll need to have their National Insurance number to hand before starting.
From early 2016, the self-assessment tax return will be replaced with a 'digital tax account'. This will be similar to the current online tax return but much of the form will be auto-filled with as much information that the Government knows about the person's income. It will still need to be checked for errors and extra information may need to be added. Paper self-assessment returns will be ended. 10 million will be enrolled to the new system from 2016 with the remainder on the system by 2020.
Who needs to fill in a tax return?
Not everyone needs to complete a tax return. If a person’s tax affairs are straightforward they may already pay all of the tax due on their earnings or pensions through their PAYE (Pay As You Earn) tax code. But a person may need to complete a tax return if they have more complicated tax affairs, even if they already pay tax through PAYE.
Some of the most common reasons for needing to fill in a tax return are listed below. For full details see here.
- You’re self-employed
- You’re a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)
- You have income above a certain level from savings, investment or property (see above link for full details)
- You receive income from overseas
- Your annual income is £100,000 or more
- You have Capital Gains Tax to pay, for example you've sold, given away or otherwise disposed of an asset such as a holiday home or shares.
- You’ve lived or worked abroad or aren’t domiciled in the UK
- You owe tax and HMRC can't collect it through your tax code, or you prefer to pay direct
If HMRC asks you to complete a tax return for any other reason (this will normally to be to make sure that you’re paying the right tax and getting the right allowances) you must always do so.
VIDEO- there is a helpful breakdown of who has to fill in a tax return at the start of this video.
Deadlines for self-assessment
31 October: all paper returns (phased out out early 2016 for most people)
31 January: online returns
Penalties for late return
If HMRC receives the tax return after the filing deadline the person is charged an automatic £100 penalty, with the possibility of additional charges. This will not have to be paid if there is a reasonable excuse for missing the deadline, e.g. a heart attack that prevents a person dealing with their tax affairs.
Tax payments
You must pay HMRC the balance of any tax you owe by 31 January of the following tax year. This payment deadline is the same whether the person files on paper or online.
For full details of deadlines and penalties for Tax Returns see here.
Signposts
- gov.uk provide a great overview of 'working for yourself'. This goes through what counts as being self-employed and what you need to do once you meet the criteria
- Thinking about going into construction? Click here for information about the Construction Industry Scheme and self-employment in this field.
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