Do I Need to do a Self Assessment?

Filing a Self Assessment tax return can seem daunting, but it is essential to understand whether you are required to submit one to HM Revenue and Customs (HMRC). This detailed guide will help you determine if you need to complete a Self Assessment tax return, what income triggers the requirement, and what exemptions may apply. We'll also cover important deadlines, how to file, and tips to make the process easier.

A Self Assessment tax return is a way for HMRC to collect Income Tax from individuals who don’t have it automatically deducted from their income. While most people in the UK pay tax through Pay As You Earn (PAYE), some people—such as those who are self-employed or have complex financial situations—must declare their income and calculate their tax liability via a Self Assessment tax return.

Who Needs to Do a Self Assessment Tax Return?

You need to complete a Self Assessment tax return if you fall into one of the following categories:

1. Self-Employed Individuals

If you run your own business as a sole trader and your income (before expenses) is more than £1,000 in a tax year, you must file a Self Assessment tax return.

2. Partnerships

If you are in a business partnership, you’ll need to complete a Self Assessment tax return. Each partner must file their own return, detailing their share of the profits or losses.

3. Income from Property

If you receive rental income from property, you must file a Self Assessment tax return. This includes individuals who:

• Earn more than £1,000 in rent in a year (property allowance).

• Rent out multiple properties.

• Rent out a holiday home.

4. High Earners

If you earn more than £100,000 in total income, you are required to complete a Self Assessment tax return. This is because your Personal Allowance is reduced for incomes over £100,000, and HMRC needs to calculate your tax liability correctly.

5. Savings and Investments

You need to file a tax return if:

• You earn more than £1,000 in savings interest (for basic-rate taxpayers).

• You earn more than £500 in savings interest (for higher-rate taxpayers).

• You receive dividend income exceeding £1,000.

6. Capital Gains

You must report capital gains (profits from selling assets such as property, shares, or other investments) if they exceed the Capital Gains Tax allowance, which is £6,000 for the 2023/24 tax year.

7. Income from Abroad

You’ll need to file a Self Assessment tax return if you receive income from abroad, such as:

• Foreign pensions.

• Overseas investments.

• Income from property abroad.

8. Claiming Tax Reliefs

If you want to claim certain tax reliefs, such as:

• Marriage Allowance (if not claimed via PAYE).

• Pension contributions that exceed your basic tax relief.

9. Directors of Companies

If you are a director of a company and receive income that is not taxed at source (for example, dividends or salary not fully covered by PAYE), you must file a Self Assessment tax return.

10. Child Benefit and the High-Income Child Benefit Charge

If you or your partner has an adjusted net income of more than £50,000 and you receive Child Benefit, you are liable for the High-Income Child Benefit Charge. You’ll need to file a Self Assessment tax return to pay this charge.

11. Income from Trusts, Settlements, or Estates

If you receive income from a trust, settlement, or estate, you may be required to file a Self Assessment tax return to declare this income.

Who Doesn’t Need to File a Self Assessment Tax Return?

There are some instances where individuals do not need to file a Self Assessment tax return, including:

• Employed individuals whose tax is deducted at source through PAYE, unless they fall into one of the above categories.

• People whose only income is from pensions or savings that fall below the thresholds for tax-free allowances.

• Those who earn less than £1,000 from self-employment or property (due to the trading and property allowances).

How to File a Self Assessment Tax Return

Filing a Self Assessment tax return involves several steps:

1. Register with HMRC

If this is your first time filing a tax return, you must register for Self Assessment. You can do this online, and HMRC will send you a Unique Taxpayer Reference (UTR), which you’ll use to file your return. Registration should be completed by 5 October following the end of the tax year in which you started self-employment or received untaxed income.

2. Collect Your Information

To file your return, you’ll need to gather all relevant documents, such as:

• Payslips and P60s.

• Invoices and receipts (for business expenses).

• Bank statements showing interest and dividends.

• Details of pension contributions.

3. Complete Your Return

You can file your Self Assessment tax return online using HMRC’s Self Assessment service or through paper filing. Online filing is recommended as it provides instant confirmation and a faster processing time.

4. Submit and Pay

Submit your return by the relevant deadline and ensure any tax owed is paid by the due date (usually 31 January following the end of the tax year).

Self Assessment Deadlines

Key deadlines for Self Assessment tax returns are as follows:

• 5 October: Deadline to register for Self Assessment.

• 31 October: Deadline for submitting paper returns.

• 31 January: Deadline for online returns and paying any tax owed for the previous tax year.

What Happens If You Don’t File?

Failing to file a Self Assessment tax return by the deadline can result in penalties. These include:

• An initial penalty of £100 if your return is late, even if you have no tax to pay.

• Daily penalties of £10 per day for up to 90 days if more than 3 months late.

• Further penalties for returns that are more than 6 months and 12 months late, as well as interest on unpaid tax.

Common Triggers for Self Assessment Tax Returns

Sometimes, you may need to file a tax return even if you don’t fit the standard criteria. These triggers include:

• Receiving a P800 form from HMRC that shows you’ve underpaid tax.

• Being a high earner or having multiple income streams that complicate your tax affairs.

• Having changes in circumstances, such as receiving an inheritance or a windfall.

Reducing Your Tax Bill Through Self Assessment

Filing a Self Assessment tax return also allows you to maximise your tax allowances and claim any deductions or reliefs you are eligible for, such as:

• Business expenses (for self-employed individuals).

• Pension contributions.

• Charitable donations.

Conclusion

Understanding whether you need to file a Self Assessment tax return is crucial for staying on top of your tax obligations and avoiding penalties. Whether you're self-employed, earn rental income, or have complex financial affairs, a Self Assessment tax return ensures that you pay the right amount of tax. By familiarising yourself with the rules, deadlines, and how to file, you can navigate the process smoothly and even benefit from claiming certain tax reliefs.