The term “self-assessment” often causes anxiety for many. Simply put, it’s a system where HMRC (Her Majesty’s Revenue and Customs) collects Income Tax from individuals and businesses. If your income isn’t taxed automatically through PAYE (Pay As You Earn), you will most likely need to file a Self-Assessment Tax Return.

The deadline for the 2023/24 tax year is fast approaching. If you plan to file your tax return online, it must be submitted by midnight on January 31, 2025.

If you’re a sole trader, a director of a limited company, or a partner in a partnership, you’re required to submit a Self-Assessment tax return to HMRC by January 31 each year.

This guide covers everything you need to know about Self-Assessment tax returns and provides a step-by-step approach to filing them.

What is a Self-Assessment Tax Return?

When you earn money that isn’t taxed at source (e.g., through PAYE), a Self-Assessment tax return helps HMRC calculate how much income tax you need to pay. This return is generally required for self-employed individuals, company directors, or anyone who has untaxed income.

In essence, this form informs HMRC about all your income sources so they can calculate the tax you owe for the financial year.

Who Needs to File a Self-Assessment Tax Return?

Not everyone needs to file a Self-Assessment tax return. You must file one if you meet any of these conditions:

• Sole traders earning more than £1,000 a year (gross).

• Business partners.

• People with total taxable income above £150,000.

• People who paid Capital Gains Tax (CGT) on assets sold for profit.

• Those subject to the High Income Child Benefit Charge.

• Individuals earning more than £1,000 from a side hustle or part-time job.

You may also need to file if you have untaxed income from:

• Rent or dividends.

• Investments or savings.

• Overseas income.

If your income isn’t automatically taxed at source, you will likely need to submit a Self-Assessment tax return.

The Basics of Self-Assessment

How Self-Assessment Works The process involves reporting your income, expenses, and any tax allowances or reliefs you qualify for to HMRC. Based on this information, you will either pay the tax owed or receive a refund if you’ve overpaid.

Why It’s Important Filing your return on time and accurately helps you stay in HMRC’s good books and avoid penalties. It also gives you a clearer picture of your financial obligations.

How to Register for Self-Assessment

The process for registering depends on whether you’ve filed before or not. Here’s what you need to do:

If You’ve Never Filed a Tax Return

• Deadline: Register by 5 October 2024.

• How to Register: Register online via the Government Gateway account and receive your Unique Taxpayer Reference (UTR).

• Your UTR will be sent within 10 days (or 21 days if abroad).

If You’ve Filed Before

• Re-register using the Self-Assessment form (CWF1) if you haven’t filed a return last year.

• Reactivate your account with your current UTR.

Self-Assessment Deadlines

To avoid penalties, adhere to these important deadlines:

• Notify HMRC: By 5 October if you’ve never submitted a return before.

• Paper Returns: Due by 31 October 2024.

• Online Returns: Due by 31 January 2025.

• Payments on Account: Due on 31 January and 31 July each year.

Consequences of Missing Deadlines Filing early gives you peace of mind and more time to budget.

• Penalty: £100 for the first day of delay.

• Additional fines: £10 per day after three months, up to 90 days.

• Interest: Charged on unpaid tax.

Submitting Your Tax Return: A Step-by-Step Guide

1. Gather Your Information:

   • National Insurance number.

   • Income details from employment, self-employment, or investments.

   • Documentation of deductible expenses and claims.

2. Choose a Filing Method:

   • Online: The easiest method, with automatic calculations.

   • Paper: For special cases like pension trustees or non-resident companies.

3. Complete and Submit:

   • Log into your HMRC account, enter your income, deductions, and allowances.

   • Review your tax liability or refund, and submit by the deadline.

Common Mistakes to Avoid

• Providing false or incomplete information.

• Losing your UTR or Government Gateway credentials.

• Failing to report all sources of income.

• Not claiming deductible expenses like business costs or charitable donations.

• Missing filing and payment deadlines.

Errors can lead to penalties, interest charges, or even audits. Always proofread and double-check your return.

Income to Declare

You must report:

• Income from employment, self-employment, and rental properties.

• Dividends, interest, and overseas income.

Some income, such as tax-exempt savings interest, doesn’t need to be declared.

Deductions and Reliefs

Expenses You Can Claim If you’re self-employed, you can deduct business-related expenses like office supplies, travel, or utility bills.

Tax Reliefs to Consider Reliefs on pension contributions, charitable donations, and investments in businesses can help reduce your taxable income.

Paying Your Tax Bill

HMRC offers various payment methods, including bank transfers and direct debits. If you can’t pay immediately, you can arrange a payment plan.

Penalties for Missing Deadlines or Incorrect Information

Failing to meet Self-Assessment deadlines is costly:

• £100 penalty: If you submit up to 3 months late.

• Daily fines: £10 per day after three months, up to 90 days.

• Interest: Applied to unpaid taxes.

How to Appeal a Penalty

You can appeal any penalty you believe was wrongly imposed through HMRC’s online portal.

Benefits of Filing Accurately

Accurate filing ensures you avoid audits, take full advantage of available tax reliefs, and maintain peace of mind.

Planning for Payments on Account

Payments on account are advance payments for your next tax bill, based on the previous year’s liability. Key points:

• Payments are due on 31 January and 31 July.

• Exemptions: If your last bill was under £1,000 or if you’ve already paid 80% of your tax.

Make sure to set aside funds throughout the year to avoid financial strain.

Should You File Your Tax Return?

You can file your tax return independently, but hiring a professional accountant ensures accuracy and efficiency, especially with recent challenges like COVID-related claims and work-from-home deductions. If in doubt, consulting a professional can help you avoid costly mistakes.

Final Tips for Stress-Free Tax Filing

• File Early: Knowing your liability or refund sooner helps you plan better.

• Stay Organized: Keep detailed records of all income, expenses, and deductions.

• Seek Expert Advice: A tax professional can help you avoid errors and penalties.

Conclusion

Filing a Self-Assessment Tax Return may seem daunting, but with proper preparation, it can be a smooth process. Being informed and well-equipped is the key to navigating tax season successfully.

Let the Experts Help

The UK tax system can be complex. At Quad Edge Accountants, we specialize in preparing Self-Assessment tax returns, ensuring they’re accurate, compliant, and filed on time. Whether you’re self-employed, a landlord, or have multiple income streams, we make the process simple and stress-free. Contact us today for a consultation and ensure your taxes are in order!