Guide to Self-Assessment tax returns

Welcome to Mercian Accountants’ comprehensive guide to Self-Assessment tax returns in the United Kingdom. Navigating the complexities of the UK tax system can be challenging, but our team of experienced accountants is here to help you through every step.

Self-Assessment is an essential aspect of the UK tax system that requires individuals with more complex tax affairs to report their income and calculate their tax liability. This guide aims to provide a thorough understanding of the Self-Assessment process, including who must complete a tax return, registration, important dates and deadlines, penalties for non-compliance, record-keeping, submission, and more.

At Mercian Accountants, we understand that tax matters can be overwhelming, so we have included additional sections on tax reliefs, allowances, payment methods, and resources to assist you in your Self-Assessment journey. We aim to help you confidently navigate the Self-Assessment process and meet all requirements and deadlines.

With our expertise and commitment to client satisfaction, Mercian Accountants is your trusted partner for all your Self-Assessment tax return needs. If you have any questions or require further assistance, please don’t hesitate to contact our friendly team of professionals.

Introduction to Self-Assessment

Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax from individuals with more complex tax affairs. It requires taxpayers to complete a tax return annually, declaring all taxable income and claiming applicable reliefs and allowances. The Self-Assessment system aims to ensure that individuals pay the correct amount of tax based on their specific circumstances.

Who needs to complete a Self-Assessment tax return?

The following individuals are typically required to submit a Self-Assessment tax return:

• Self-employed individuals with an annual income over £1,000
• Company directors (excluding those of non-profit organisations)
• Individuals with an annual income over £100,000
• Individuals with rental income or other untaxed income over £2,500
• Individuals with savings or investment income over £10,000
• Individuals with foreign income
• Trustees and personal representatives of deceased estates
• Individuals who need to claim certain tax reliefs or allowances
• Individuals who owe Capital Gains Tax from selling assets

How to register for Self-Assessment

To register for Self-Assessment, follow these steps:

a. Determine if you need to register: Review the criteria mentioned in section 2 to see if you need to complete a Self-Assessment tax return.

b. Register as self-employed, a sole trader or a partner: Register your business with HMRC if applicable.

c. Register for Self-Assessment online: Visit the HMRC website and follow the registration process for Self-Assessment. You will need your National Insurance number and personal details.

d. Receive your Unique Taxpayer Reference (UTR) number: After registering, HMRC will send you a UTR number by post, which is required for filing your tax return.

e. Create a Government Gateway account: This allows you to access HMRC’s online services, including submitting your tax return.

Self-Assessment: essential dates and deadlines

• 5th October: Deadline to register for Self-Assessment for the previous tax year
• 31st October: Paper tax return deadline
• 30th December: Deadline for online tax return submission if you want HMRC to collect tax through your PAYE tax code (only applicable for tax bills under £3,000)
• 31st January: Online tax return and the first payment on account deadline
• 31st July: Second payment on account deadline

Fines and penalties for late filing and payment

HMRC imposes penalties for late filing and payment of Self-Assessment tax bills:

• Late filing: £100 fine for up to 3 months late, additional penalties for further delays
• Late payment: 5% of the unpaid tax 30 days, six months, and 12 months late

Records to keep

You should retain records of all income and expenses related to your tax return, including:

• Invoices and receipts for income and expenses
• Bank statements
• Rental income records
• Records of any taxable benefits
• Dividend vouchers
• Interest statements
• Pension statements
• Capital gains records
• Foreign income records

How to submit a Self-Assessment tax return

You can submit your Self-Assessment tax return either online or by paper:

• Online: Log into your Government Gateway account, complete the tax return form, and submit it electronically. You will receive a confirmation once your return has been successfully submitted.
• Paper: Complete the paper tax return form (SA100) and any relevant supplementary pages. Send the completed forms to HMRC by post before the 31st October deadline.

What to do if you no longer have to submit a Self-Assessment tax return

If your circumstances change and you no longer need to submit a Self-Assessment tax return, you should inform HMRC as soon as possible. You can do this by contacting HMRC’s Self-Assessment helpline or sending a letter to your local tax office. Once HMRC has confirmed your deregistration, you will not be required to submit future tax returns.

What is a Simple Assessment?

A Simple Assessment is a method HMRC uses to calculate the tax liability for certain taxpayers with straightforward tax affairs. It is typically used for individuals who owe tax that cannot be collected through their PAYE tax code. In this case, HMRC will send a tax calculation (P800) detailing the amount due, which must be paid by the specified deadline.

What is a Short tax return?

A Short tax return (SA200) is a simplified version of the standard Self-Assessment tax return (SA100). It is designed for taxpayers with less complex tax affairs, such as those with only employment or pension income. HMRC may invite eligible taxpayers to complete a Short tax return instead of the full version.

Self-Assessment guides and support

HMRC provides a range of resources and support to help taxpayers navigate the Self-Assessment process, including:

• Online guides and webinars
• A Self-Assessment helpline
• Detailed guidance notes for completing tax return forms

Tax reliefs and allowances

Depending on your circumstances, tax reliefs and allowances are available to reduce your tax liability. Examples include:

• Personal Allowance
• Marriage Allowance
• Dividend Allowance
• Personal Savings Allowance
• Enterprise Investment Scheme (EIS) relief
• Seed Enterprise Investment Scheme (SEIS) relief
• Capital Gains Tax reliefs

Payment methods for Self-Assessment tax bill

You can pay your Self-Assessment tax bill using various methods, such as:

• Direct Debit
• Online or telephone banking (Faster Payments, Bacs, or CHAPS)
• Debit or corporate credit card online
• Bank or building society cheque
• Pay at a bank or building society using a paying-in slip
• Budget Payment Plan

Each payment method has its own processing time, so ensure you choose a method that allows you to meet the payment deadline.

Amending a submitted Self-Assessment tax return

If you discover an error or need to update information on a submitted tax return, you can amend it within 12 months of the original submission deadline (31st January or 31st October, depending on whether you filed online or by paper). To amend an online return, log into your Government Gateway account, make the necessary changes, and resubmit the return. Send a new, corrected return to HMRC by post for paper returns.

Self-Assessment for partnerships and trusts

Partnerships and trusts are also required to submit Self-Assessment tax returns. Partnerships must complete a Partnership Tax Return (SA800) and each partner’s tax return. Trusts and estates must submit a Trust and Estate Tax Return (SA900).

Self-Assessment FAQs

Common questions and concerns about the Self-Assessment process such as:

1. How do I know if I need to file a Self-Assessment tax return? Refer to the criteria outlined in section 2 of our guide. If you meet any requirements, you must file a Self-Assessment tax return.
2. How can I register for Self-Assessment? Visit the HMRC website to register for Self-Assessment online. You’ll need your National Insurance number and personal details.
3. When are the deadlines for filing and paying my Self-Assessment tax bill? Critical deadlines include 31st October for paper tax returns, 31st January for online tax returns and the first payment on account, and 31st July for the second payment on account.
4. What happens if I miss a deadline? HMRC imposes penalties for late filing and payment. Late filing incurs a £100 fine for up to 3 months, with additional penalties for further delays. Late payment penalties are 5% of the unpaid tax at 30 days, 6 months, and 12 months late.
5. How do I claim a tax refund through Self-Assessment? You can claim a refund on your Self-Assessment tax return if you have overpaid tax. The refund will typically be paid within a few weeks of HMRC processing your tax return.
6. Can I make changes to a submitted tax return? You can amend your tax return within 12 months of the original submission deadline. To amend an online return, log into your Government Gateway account, make the changes, and resubmit the return. Send a new, corrected return to HMRC by post for paper returns.
7. How do I estimate my payments on account? Payments on account are based on 50% of your previous year’s tax bill (excluding any Capital Gains Tax). Calculate your expected tax liability for the current year and divide it by two to estimate your payments.
8. What records do I need to keep for my Self-Assessment tax return? Keep records of all income and expenses related to your tax return, including invoices, receipts, bank statements, rental income records, dividend vouchers, interest statements, pension statements, capital gains records, and foreign income records.
9. What should I do if my circumstances change (e.g., marriage, divorce, retirement)? Report any changes in your circumstances to HMRC, as they may affect your tax liability or the need to file a Self-Assessment tax return. You can update your details online or contact HMRC’s Self-Assessment helpline.
10. How do I pay my Self-Assessment tax bill? You can pay your tax bill using various methods, such as Direct Debit, online or telephone banking, debit or corporate credit card online, bank or building society cheque, or at a bank or building society using a paying-in slip. Ensure you choose a method that allows you to meet the payment deadline.
11. How does Self-Assessment interact with my student loan repayments? You must report student loan deductions on your Self-Assessment tax return if you have a student loan. The repayments will be calculated based on your income, and the amount due will be included in your total tax bill.

Self-Employment and Self-Assessment:

1. Registering as self-employed with HMRC: If you’re self-employed or a sole trader, you must register with HMRC. You can register online through the HMRC website. When registering, you’ll need your National Insurance number and personal details. Once registered, you’ll receive a Unique Taxpayer Reference (UTR) number by post, which is required for filing your tax return.
2. National Insurance contributions for the self-employed: Self-employed individuals are responsible for paying Class 2 and Class 4 National Insurance contributions. Class 2 contributions are a flat weekly rate, while Class 4 contributions are based on a percentage of your annual profits. Both types of contributions are typically paid through your Self-Assessment tax return.
3. Reporting business income and expenses: On your Self-Assessment tax return, you must report your total business income, which includes sales, fees, and any other income related to your trade. You should also report allowable business expenses, which can be deducted from your income to calculate your taxable profit.
4. Claiming allowable expenses: Allowable expenses are costs incurred exclusively for your business, such as:

• Office costs (e.g., stationery, phone bills)
• Travel costs (e.g., fuel, public transport fares)
• Clothing expenses (e.g., uniforms, protective gear)
• Staff costs (e.g., salaries, subcontractor fees)
• Financial costs (e.g., insurance, bank charges)
• Advertising and marketing costs
• Training and professional fees

You can claim these expenses on your tax return, reducing taxable profit and overall tax liability.

5. Accounting methods (cash basis vs accruals basis): There are two main accounting methods for reporting income and expenses: cash basis and accruals basis.

• Cash basis: Under this method, you report income and expenses when money is received or paid. This method is more straightforward and recommended for smaller businesses or sole traders with an annual turnover of £150,000 or less.
• Accruals basis: Also known as the traditional accounting method, you report income and expenses when earned or incurred, regardless of when the money is received or paid. This method provides a more accurate picture of your financial position but may be more complex.

6. Self-employed tax reliefs, such as the Trading Allowance: The Trading Allowance is a tax relief for self-employed individuals, allowing you to earn up to £1,000 tax-free from your trade or business each tax year. If your annual income is £1,000 or less, you don’t need to register for Self-Assessment or pay tax. If your income exceeds £1,000, you can either deduct the £1,000 allowance from your income or claim allowable expenses, but not both.

Property Income and Self-Assessment:

1. Reporting rental income from residential and commercial properties: Landlords must report rental income from residential and commercial properties on their Self-Assessment tax return. This includes rent, service charges, and any other income related to the property.
2. Claiming allowable expenses for landlords: Landlords can claim allowable expenses on their tax return, such as:

• Property maintenance and repairs
• Mortgage interest (restricted for residential properties)
• Insurance premiums
• Agent fees
• Legal and professional fees
• Council tax and utility bills (if paid by the landlord)

These expenses reduce your taxable profit and overall tax liability.

3. Property income tax reliefs, such as Rent a Room Scheme: The Rent a Room Scheme allows homeowners to earn up to £7,500 tax-free each tax year from renting out a furnished room in their main home. If the income exceeds this threshold, you must report it on your tax return and pay tax on the excess.
4. Non-resident landlords and their tax obligations: Non-resident landlords must register with HMRC and file a Self-Assessment tax return to report their UK rental income. They may also be subject to the Non-Resident Landlord Scheme, which requires tenants or letting agents to withhold tax from rent payments.
5. Furnished holiday lettings: Furnished holiday lettings are subject to specific tax rules and reliefs, such as capital allowances and Capital Gains Tax reliefs. To qualify, the property must be furnished, available for let at least 210 days per year, and let for a minimum of 105 days.
6. Capital Gains Tax implications for selling property: You may be subject to Capital Gains Tax on any profit when selling a property that is not your main home. You must report the gain on your Self-Assessment tax return and pay any tax due.

Self-Assessment for High-Incomes

1. The High Income Child Benefit Charge: If your income is above £50,000 and you or your partner receive Child Benefit, you may be subject to the High Income Child Benefit Charge, which reduces the benefit amount. You must report this on your Self-Assessment tax return.
2. The tapered annual allowance for pension contributions: High-income earners with an adjusted income over £240,000 face a tapered annual allowance for pension contributions. The standard £40,000 allowance is reduced by £1 for every £2 of income above this threshold, with a minimum allowance of £4,000.
3. Tax implications of earning over £100,000: When your income exceeds £100,000, your allowance is gradually reduced by £1 for every £2 of income above £100,000. This results in a higher effective tax rate for income between £100,000 and £125,140.
4. Additional tax planning considerations for high-income earners: High-income earners may benefit from tax planning strategies, such as income splitting, pension contributions, charitable donations, or investments in tax-efficient schemes like Enterprise Investment Schemes (EIS) or Venture Capital Trusts (VCT).

Self-Assessment and Student Loans

1. Reporting student loan deductions on your tax return: If you have a student loan, you must report student loan deductions on your Self-Assessment tax return. HMRC will calculate the repayment amount based on your income.
2. Calculating the correct repayment amount: Student loan repayments are a percentage of your income above a certain threshold, which varies depending on the repayment plan (Plan 1, Plan 2, or Postgraduate Loan).
3. Different repayment plans for Plan 1, Plan 2, and Postgraduate Loans: Each repayment plan has different thresholds and repayment rates. Ensure you select the right plan on your tax return to calculate the correct repayment amount.

Self-Assessment for Overseas Income and Non-Residents:

1. Reporting foreign income on your tax return: If you are a UK resident with foreign income or gains, you must report them on your Self-Assessment tax return. This includes income from overseas properties, employment, pensions, or investments.
2. Double Taxation Agreements and claiming foreign tax credits: Double Taxation Agreements prevent you from being taxed twice on the same income. If you have paid tax on foreign income in another country, you can claim foreign tax credits on your UK tax return to offset the tax liability.
3. Non-resident landlords and their UK tax obligations: Non-resident landlords with UK rental income must register with HMRC and file a Self-Assessment tax return. They may also be subject to the Non-Resident Landlord Scheme, which requires tenants or letting agents to withhold tax from rent payments.
4. Statutory Residence Test and its implications for your tax status: The Statutory Residence Test determines your UK tax residency status, which affects your tax liability on foreign income. The test considers the number of days spent in the UK, work ties, and family connections.

Accessibility and Assistance for Self-Assessment Taxpayers

1. Support for taxpayers with disabilities or special needs: HMRC provides a range of support services for taxpayers with disabilities or special needs, such as accessible tax return forms, large print or Braille communications, and a Text Relay service.
2. Language support and translated resources: HMRC offers language support for non-English speakers, including telephone interpretation services and translated resources in various languages.
3. Support for older taxpayers and those with limited digital access: Organisations like Tax Help for Older People offer free, independent tax advice to those with limited digital access, assisting with Self-Assessment and other tax issues.
4. Tax Help for Older People and other support organisations: Tax Help for Older People and similar organisations provide free, confidential tax advice to older taxpayers or those on low incomes, helping with issues like Self-Assessment, tax codes, and pension tax relief.

Get professional help

In conclusion, navigating the Self-Assessment tax return process can be complex and time-consuming, particularly for self-employed individuals, landlords, high-income earners, and those with foreign income or non-resident status. Understanding the requirements, deadlines, and potential tax reliefs applicable to your situation is crucial to ensure accurate reporting and avoid penalties.

At Mercian Accountants, our team of experienced professionals is here to help you through every step of the Self-Assessment process. We provide tailored advice and support, removing tax planning and compliance stress. Don’t hesitate to contact us for a free consultation to discuss your tax needs and discover how we can help you take control of your financial future.

Contact us today at hello@mercianaccountants.co.uk or call on 01743 562430 to schedule your consultation and get started on the path to a seamless Self-Assessment experience.

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