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Tax - Self Assessment
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Self Assessment means that you fill in a tax return form every year. This tells HMRC how much you earn, and if you have received money from other sources. HMRC will use your Self Assessment to work out how much tax you need to pay, and whether you are owed tax relief.
It is very important that you complete your tax return accurately. If you do not provide all the information, you may not pay the right amount of tax, and you could face a tax bill later or miss out on tax relief that is owed to you. There are Self Assessment penalties for incomplete or late returns.
To find out more about Self Assessment please follow the links below:
Self Assessment Tax Returns
Unique Tax Reference Numbers
Completing Self Assessment Tax Returns
Self Assessment Tax Return Submission
Self Assessment Penalties
Self Assessment Tax Calculations
You need to complete a Self Assessment tax return if any of the following apply:
- you are self-employed
- you are a company director
- you own a business or part of a business
- you are employed and earn more than £100,000
- you have an income of £10,000 from property, or savings and investments (after tax), or £2,500 or more from property, savings or investments (tax-free)
- you are receiving income from the estate of a deceased person (if tax is still due on the estate)
- you are receiving money from overseas
- you are employed and you want to claim work related expenses of over £2,500
If you are over 65 and your income is over £24,000 you may also need to complete a tax return.
If two or more individuals are partners in a business, each person must register for Self Assessment and complete a tax return.
There are some other individuals who always need to complete tax returns, including people who underwrite insurers, and any minister of religion.
To get a tax return form you need to register for Self Assessment with HMRC. When you have registered for Self Assessment you can complete your tax return form on paper or online.
The easiest and quickest way to register for Self Assessment is online at the HMRC website. You can also write to HMRC to register for Self Assessment.
If two or more individuals are partners in a business, each person must register for Self Assessment.
However, in some circumstances (such as when the company or trust becomes a partner in another partnership) you may need to register a company or trust for Self Assessment. If this is the case, the secretary or trustee should submit a paper form (SA402).
Your Unique Tax Reference (UTR) is a ten-digit number that is used to record all your direct tax transactions. You only need one UTR, and this will not usually change.
Not everybody has a UTR, but you need one to complete your Self Assessment tax return. A UTR number is not to be confused with a national insurance number. A UTR number is only issued if you register for Self Assessment. It is important to keep your UTR number as it will be needed when submitting your Self Assessment tax return either online or on paper and if you have to communicate with HMRC.
If you have registered for Self Assessment your UTR will be included in communication from HMRC. It will also appear on your online Self Assessment tax return form. If you have completed tax returns in previous years your UTR will be included in communication from HMRC or the Inland Revenue.
If you do not already have a UTR you will be given one when you register for Self Assessment. In addition, anyone can apply for a UTR at their local tax office.
The best way to complete your tax return is online. You have the benefit of secure encryption on the government website, and the whole process is quicker. Your tax is calculated immediately when you enter the information, you can print copies for your records, and you can make payments online if you wish.
- When you first register for online Self Assessment you will be sent an activation code in the post. You need to enter this activation code into the website, then choose a username and password.
- Once you are on the Self-Assessment pages you should follow the on-screen instructions and submit the information requested. You will need to know your Unique Tax Reference (UTR) number.
- If you encounter problems, there is a helpline telephone number.
If you are unable to complete your tax return online, you can fill in a paper copy. You should request this from HMRC. There are a few circumstances where you will need to fill in a paper copy, such as if you are completing a tax return on behalf of a trust.
The tax year usually ends on 5 April. If you submit your individual Self Assessment online the deadline is 31 January the following calendar year. If you choose to complete your Self Assessment on paper the deadline is three months earlier, ie. 31 October. If you are employed and have paid too little tax, and you want HMRC to adjust your tax code, the deadline for online submissions is 30 December.
So for example the tax year 6 April 2011 to 5 April 2012, the deadline to submit your Self Assessment online is usually 31 January 2013, and the deadline to submit a paper copy is 31 October 2012.
Occasionally you may receive an extended deadline, but only if HMRC write to you and tell you this. You cannot usually request a deadline extension.
There are financial penalties if you are late submitting your Self Assessment tax return. If you are one day late, there is a penalty of £100. For every day after, the penalty increases by £10, to a maximum of £1000. If you are six months late, the penalty increases by a further £300 or your tax bill may be increased by 5%. If you are one year late, this may increase by a further £300, and your tax bill may be increased by up to 100% in some cases.
It is very important that you complete your tax return carefully and accurately.
If you fail to take reasonable care completing your tax return, you may be charged up to 30% extra tax, although sometimes there is no penalty.
If HMRC believe that you have deliberately provided misleading information you may be charged up to 70% extra tax, or more if you try to conceal the mistake.
These penalties can be reduced if you tell HMRC about your mistake as soon as possible.
If you do not submit your self assessment tax return on time HMRC will automatically charge you a late filing penalty. The late filing self assessment penalties are:
- £100 fixed penalty. The fixed penalty is applied if there is no tax to pay or if any tax due is paid on time
- Following 3 months in addition to the £100 fixed penalty, £10 per day will be charged up to a maximum of £900
- Following 6 months another penalty totaling 5% of the tax due or £300. Whichever is the greater of the two will be charged
- Following 12 months a further 5% or £300 charge, whichever is the greater of the two
In addition to filing your self assessment tax return late you will have additional penalties if you do not pay any tax you owe on time.
The additional late penalties for tax owed are:
- At 30 days 5% of any tax unpaid
- At 6 months 5% of any tax unpaid
- At 12 months 5% of any tax unpaid
HMRC introduced new penalties for self assessment on the 6th April 2011. If you have outstanding self assessment tax returns to complete for the 2008-2009 and 2009-2010 tax years then the old penalty rules usually apply.
Late Penalties Under The Old Self Assessment Rules
- £100 penalty for any late self assessment tax return
- If you do not owe tax any late penalty should not be enforced
Late Penalties for Late Payment of Tax
- If you owe tax up to the 2009-2010 tax year interest will charged on any tax owed. Depending on your circumstances and in addition to any tax owed a further penalty could be applied called a surcharge. The amount of surcharge could be 1%, 2% or 5% of the tax owed.
The tax that you owe is calculated according to the information you provide in your Self Assessment. Your taxable income is calculated by working out your total income and subtracting tax-free allowances, interest, expenses and benefits.
Any tax you have already paid is taken into account. If you are self-employed, this also includes National Insurance contributions.
Different types of income are subject to different tax rates, and income above a certain level is subject to higher tax rate. If you have certain savings or assets you may also have to pay Capital Gains Tax.
You will receive a figure that states ‘total tax due’. This figure does not include tax owed from other years, or any money you may have already paid to HMRC for this year’s tax.
After you complete your Self Assessment, you may receive a statement giving your tax calculation. If you think that your tax calculation is incorrect, you should inform HMRC.
If you complete your Self Assessment online the information will be given immediately and you will not usually receive a separate tax calculation. Your tax calculation shows all the income you receive before tax has been deducted, your income after deductions and tax-free allowances, and the total income tax due. If you are self-employed it also include National Insurance contributions.
The total income tax due includes adjustments for PAYE taxed earnings, tax paid on savings, and refunds you have received. It does not include payments you have already made this year or money you owe from previous years.
If you are employed or receive a pension, you should check that your PAYE tax code is correct. If your tax code is wrong you should inform HMRC as soon as possible.
If you open a business or become self-employed, it is important to keep proper records from the very start. Without these records you cannot complete an accurate tax return.
You should keep accurate records of your income and all business-related expenditure. This includes all sales, purchases and expenses. If you employ people in a business you need to keep full records of all PAYE transactions, including wages and deductions. If your business is VAT registered you need to keep full records of all VAT transactions.
In many cases there are legal requirements for you to keep certain records. Full details of these requirements are available from HMRC.