Do I have to complete a self-assessment tax return?

Understanding self-assessment tax returns is essential for managing your finances and avoiding penalties. These returns allow individuals and businesses to report their income and expenses to HMRC, ensuring compliance and accurate tax payments. Read on to find out why registering for self-assessment is important and how to complete the registration process. 

What is a self-assessment tax return? 

A self-assessment tax return is the system that HM Revenue and Customs (HMRC) uses for individuals and businesses to report their income and expenses. The self-assessment tax return process is largely used by people who are self-employed but is also used by business partners and people with additional income (outside of their other employment). By completing these returns, individuals can keep track of their earnings and easily access their tax information. 

The taxpayer completes self-assessed tax returns annually, including details on their earnings from all income streams. HMRC receives and uses this information to calculate how much tax a person owes. Completing a self-assessment tax return on time is vital, as submitting your tax return late can result in fines. 

Who needs to submit a self-assessment? 

Self-assessment tax returns only need to be submitted if you earn money outside of traditional employment. This is because the majority of people will pay taxes through a Pay As You Earn (PAYE) scheme. However, there are a number of scenarios in which you may need to file a self-assessment tax return: 

• If you are self-employed 
• If you are a partner in a business 
• If you are the trustee of an estate 

As well as these reasons, you will also need to submit a self-assessment if you are renting out a property, or if you earn further income from savings, commissions or investments. In some situations, these earnings can be included as part of a PAYE scheme, but HMRC requires you to submit a self-assessment if your earnings exceed the thresholds. 

When do I need to file a self-assessment? 

There are deadlines for filing a self-assessment tax return that you must adhere to. You will need to make two interim payments around the tax year’s end. These payments are based on the previous year’s income tax liability, divided into two instalments. You must make the first payment by January 31st of the relevant tax year, while the second must be paid by the following July 31st. It’s important to note that you must pay your liability by January 31st, regardless of whether your tax return is submitted online or on paper.

What information do I need to complete a self-assessment tax return?

In order to complete a self-assessment tax return, you will need your Unique Taxpayer Reference (UTR). You can get your UTR by registering for self-assessment, after which you’ll find your UTR in your personal tax account. 

As part of the registration process, you’ll need to determine which registration form fits your employment status. The CWF1 form applies to self-employed individuals and can be used to register for self-assessment, as well as Class 2 National Insurance. If you are not self-employed but have other income streams, you’ll most likely use the SA1 form to register and receive your UTR. It’s important to check that all the information you submit as part of your registration is accurate. 

If you’ve previously registered for self-assessment but have not filed a tax return, you may need to reactivate your self-assessment through your personal tax account. Through HMRC’s online portal, you will be able to easily access all of your task details. By following the proper procedures and registering for self-assessment accurately, you can stay current with your filings, meet the required deadlines for registration and submission, and avoid any issues with HMRC.

Paying your self-assessment tax bill 

When you have registered for self-assessment there are different ways you can pay your tax bill. How you choose to pay may affect how much time you need, to ensure that you pay your tax bill before the deadline. You can pay HMRC using online banking, by debit or corporate card online, or in person at your bank or building society. You can also pay by direct debit to HMRC or by sending a cheque in the post. However, these methods of payment take longer to process, so take this into account when planning your tax payments. 

To avoid fines and late payment penalties, you must register for self-assessment by the deadline of October 5th for your business’s second tax year. 

What happens if I miss the self-assessment deadline? 

If you miss the self-assessment deadline you will incur penalties from HMRC. In the first instance, HMRC will send you an estimated bill known as a “determination” that must be paid. The penalties incurred by late payment can include extensive fines, which increase the longer you go without filing your tax return. In 30 days you’ll be charged 5% of tax unpaid, with another 5% of the unpaid tax added every 6 months. If you do not pay the unpaid tax and penalties to HMRC, they can pursue payment through the courts, which may lead to bankruptcy.

Get in touch

If you need advice and guidance on how to manage your self-assessment tax returns and other tax requirements, then Rayner Essex is here to help. Our professional and experienced accountancy team can help you to manage your taxes, ensuring that you meet all the necessary deadlines and stay on top of payments. To find out more about how we can support you, get in touch today.