How to hmrc self assessment

What is HMRC Self Assessment?

HMRC Self Assessment is the system used by HM Revenue and Customs (HMRC) in the United Kingdom to administer Income Tax. It's the way HMRC collects taxes on income that isn't taxed at source, such as through an employer's payroll (PAYE - Pay As You Earn). If you have income that falls outside of the PAYE system, or if you have certain types of income, you are legally required to inform HMRC about it through a Self Assessment tax return.

Who Needs to Register for Self Assessment?

The requirement to register for Self Assessment depends on your specific circumstances and the types of income you receive. Generally, you need to register if any of the following apply:

• You are self-employed: If you're a sole trader and your income from self-employment is £1,000 or more in a tax year (after deducting expenses).
• You are a partner in a business partnership: You need to register as a partner.
• You receive untaxed income: This could include income from renting out a property, certain benefits, or income from outside the UK.
• You have income from investments or savings: If you receive more than £2,500 in untaxed income from savings and investments, or if you have other income that means you're a higher rate taxpayer.
• You need to pay certain taxes: This includes Capital Gains Tax or High Income Child Benefit Tax.
• You are a director of a limited company: Unless you receive dividends and salary below certain thresholds and your company has paid your tax through PAYE.

It's crucial to check the specific criteria on the GOV.UK website, as rules can be complex and depend on individual situations. If you're unsure, it's always best to contact HMRC directly or seek advice from an accountant.

How to Register for Self Assessment

The registration process for Self Assessment is managed by HMRC and can be done online. The deadline for registering is very important: 5 October following the end of the tax year for which you need to register. For example, if you need to register for the tax year 6 April 2023 to 5 April 2024, you must register by 5 October 2024.

Here are the general steps:

1. Check if you need to register: Use the guidance on GOV.UK.
2. Gather necessary information: You'll need your National Insurance number and personal details.
3. Register online: Go to the GOV.UK website and find the 'Register for Self Assessment' section. You'll be asked to create a Government Gateway user ID and password if you don't already have one.
4. Receive your Unique Taxpayer Reference (UTR): After registering, HMRC will send you a letter containing your 10-digit UTR. This is a crucial number that you'll need for all your Self Assessment communications and submissions. It can take up to 10 working days to arrive.

It's vital to register promptly as there are penalties for late registration.

What Information Do I Need for My Tax Return?

Once you are registered and it's time to file your tax return (usually in the autumn/winter following the end of the tax year), you'll need to gather specific financial information. This includes:

• Income details: Records of all income earned, including wages (P60/P45 if applicable), self-employment income and expenses, rental income, pension income, and any other untaxed income.
• Expenses: Details of any allowable business expenses if you are self-employed or have rental income. Keep receipts and records organised.
• Capital gains: Information about any assets you've sold that resulted in a profit (capital gain) or a loss.
• Other relevant information: This could include details of student loan repayments, Gift Aid donations, or pension contributions.

Keeping good financial records throughout the year will make preparing your tax return much easier.

How to File Your Self Assessment Tax Return

There are two main ways to file your Self Assessment tax return:

1. Online via HMRC's website: This is the most common method. You'll use your Government Gateway ID to log in and complete the tax return form electronically.
2. Using commercial software: Many accounting software packages are approved by HMRC for filing Self Assessment tax returns.
3. By post (paper return): This is less common and generally only available if you have a valid reason not to file online. Paper returns must be sent by post, and the deadline is earlier than for online filing.

The deadline for filing your online tax return is 31 January following the end of the tax year. For example, for the tax year 6 April 2023 to 5 April 2024, the deadline to file online is 31 January 2025.

When is My Tax Bill Due?

The deadline for paying your Income Tax, Capital Gains Tax, and any National Insurance contributions through Self Assessment is also 31 January following the end of the tax year. So, for the tax year ending 5 April 2024, the tax bill is due by 31 January 2025.

It's important to note that if you file your tax return close to the deadline, you still need to ensure your payment is made by 31 January. Late payments will incur interest and potentially penalties.

Payments on Account

If your tax bill for a particular year is £1,000 or more, and more than 80% of your tax is paid through PAYE, you may be asked to make 'payments on account'. These are advance payments towards your tax bill for the *next* tax year. They are usually due in two instalments:

• First payment: 31 January (for the tax year that ended on the previous 5 April).
• Second payment: 31 July.

These payments help to spread your tax bill more evenly throughout the year and avoid a large bill the following January. You can reduce your payments on account if you expect your income to be lower in the next tax year.

Penalties and Interest

HMRC imposes penalties and charges interest for late actions related to Self Assessment:

• Late registration: A penalty of up to £100 if you register late. Further penalties can apply if HMRC has to ask you to register.
• Late filing: A penalty of £100 if your tax return is filed late. Additional penalties apply if the return is more than 3, 6, or 12 months late.
• Late payment: Interest is charged on tax paid late, and penalties can also be applied if you consistently pay late.

It is always best to meet all deadlines to avoid these charges.

Seeking Help

Navigating Self Assessment can be complex. If you are unsure about any aspect of the process, have complex tax affairs, or simply want peace of mind, consider seeking professional advice from an accountant or tax advisor. They can help you register, prepare your tax return accurately, ensure you claim all eligible expenses and reliefs, and meet all deadlines.