Self-Assessment – What you need to know
Do you need to file a self-assessment?
If you receive notification from HMRC to complete a self-assessment or are in receipt of any income that is NOT taxed at source you must file a self assessment. Usually, anyone who earns above £100,000 annually, or if you or your partner is in receipt of child benefits whilst one of you earns £50,000 or more, must also complete a self assessment.
What is income that is not taxed at source?
This includes rental income, self-employed income (no matter how little), dividends from shares.
When do you need to file your self assessment?
The tax year (or fiscal year as accounts often call it) runs from 6 April – 5 April and your tax return needs to be filed by the following 31 October if done on paper or by 31 January if done online.
All tax owed must also be paid by 31 January and in some cases you may also have to make additional payments for future tax that the HMRC expect you to owe (this is known as making payments on account and is to reduce a large tax bill once a year).
Being organised and the right tax advice can make completing your income tax return a relatively painless process.
What do you need to complete your self assessment?
• Details of all income you have received through PAYE; you will need your P60 if you were paid up to the end of the tax year or your P45 if you stopped working through PAYE during the tax year.
• Bank statements showing any interest received and whether tax has been deducted at source on the bank accounts
• Details of all rental income received
• Details of all dividends received
• Any information of any ‘benefits in kind’ you have received such as health insurance through an employer
• Full details of expenses received for travel etc
• Full details of all self-employed income
• Details of Child Benefit claimed
• Details of any tax deductable expenses such as phone bills, office rent, purchase of computers or equipment, advertising, decorating or maintenance for rental properties, travel, professional fees, IT subscriptions, donations to charities etc (you can fund details of allowable expenses through the HMRC website or your accountant can help you)
• Bank statements – personal and business statements if you have separate business accounts
Why use an accountant?
An accountant has to complete annual CPD (this is training to ensure they are up to date in their profession) and will know all the items that can be legitimately claimed against income as well as what allowances you can claim and will most likely save you money. Number crunching isn’t everybody’s forte so giving your information to a professional who does it day in day out relieves you of the burden, leaving you to do what you are good at too! The penalties are strict with the HMRC so it’s definitely worth passing the work to someone else rather than leaving it to the last minute and risking some hefty fines. Make sure you provide your accountant with all your tax information including your UTR (unique taxpayer reference) which will be detailed on your correspondence from HMRC.
Penalties for late submission of your self assessment:
One day late – You’ll automatically receive a £100 fine. This applies even if you have no tax to pay
Three months late – A fine of £10 for each day up to a 90-day maximum of £900, this is in addition to the fixed penalty above
Six months late – A fine of either £300 or 5% of the tax due, whichever is the higher, again this will apply on top of the penalties above
12 months late – A further £300 fine or 5% of the tax due, whichever is the higher, will be added to your bill on top of the penalties above.
If you’re more than 12 months late with your tax return, you may be asked to pay up to 100% of the tax due as well as any tax you owe, doubling your payment of tax as well as all the penalties.