You can file your self-assessment tax return at any time between the start of a new tax year on April 6 and the January 31 deadline the following year. Filling out your tax return may appear to be a daunting task, but it does not have to be. See our tips below to help you collect all of the information you need while also filing on time.
What is Self-assessment?
Most people’s tax liabilities are deducted automatically from their paychecks via PAYE (pay as you earn).
HMRC does not know how much tax self-employed workers owe, therefore, you must inform them. You do this once a year using the self-assessment system by filing a tax return online or by mail.
Freelancers, contractors, and small business owners are required by law to do this, as well as make two “payment on account” deposits in January and July (more on this later). If you do not do this, you will be penalised for late submission.
The information on your tax return is then utilised to compute your total tax bill and whether or not you are awarded a refund.
Do You Need to File a Tax Return?
Employees and pensioners often have tax deducted automatically at the source from their pay and pensions. However, individuals and organisations having other income that is not deducted at source and exceeds a particular threshold must record it on a self-assessment tax return.
You must file a tax return if you were self-employed as a sole trader in the previous tax year (6 April 2022 to 5 April 2023) and earned more than £1,000 in that year. You must also file one if you were a partner in a business partnership or a director of a limited company and your income was not taxed at source and/or you owe additional tax.
Even if your principal source of income is your pay or pension, you may still be required to file a return if you work in certain industries, were paid more than £100,000 under a PAYE salary scheme, or have any other untaxed income, such as:
- Renting
- Tips and commission
- Savings, investments and dividends
- Foreign income
You can also file a tax return online to claim some income tax relief or to demonstrate your self-employment status, for example, to claim Tax-Free Childcare or maternity allowance.
If you are still unsure if you need to file a return, HMRC provides this decision tree.
If HMRC has notified you that you must file a return, you must do so. Even if you have not received such a notice, you may still be required to file a tax return if you had a new source of income or capital gains in the previous tax year on which you must pay tax—if this is the case, notify HMRC immediately.
Who Needs to Fill Out a Self-assessment Tax Return?
The concept also applies to persons who pay PAYE tax yet must declare their income for other reasons. This includes the following:
- Having additional sources of income
- Some COVID-19 grant or support payments
- Making a loss on investments
- Claiming extra tax relief on their pension
- They need to pay back child benefit.
- Making capital gains by selling certain assets
Tax Return Dates and Deadlines
If you are self-employed or a sole trader, the deadline for enrolling for Self Assessment for the 2022/23 tax year is 5 October 2023.
The deadline for filing paper tax returns is October 31, 2023, at midnight. The online deadline is January 31, 2024, at midnight.
Following the completion of your first tax return, you may be required to make two payments towards your anticipated tax bill for the current tax year, in addition to whatever tax and National Insurance (NI) is due for the previous tax year.
This is known as payments on account, and you will need to do it every year from now on.
The only exception is if your most recent Self Assessment tax bill was less than £1,000, or if you’ve already paid more than 80% of all the tax you owe at source in the previous year (underpaid tax recovered via PAYE the next year also qualifies as being deducted at source).
The first deadline for paying the tax you owe on the account is also midnight on January 31 for the first payment on the account and midnight on July 31 for the second payment on the account.
Here’s an illustration.
If Jane Smith has a Self Assessment cost of £3,000 for 2022/23, she must pay £4,500 by 31 January 2024—£3,000 for 2022/23 plus the first instalment of £1,500 for the tax and National Insurance bill for 2023/24. The remaining £1,500 must be paid by July 31, 2024.
How to Register and File a Tax Return Online
According to HMRC, 96% of tax returns were filed online for the tax year 2022/23 because it’s simple, secure, and available 24 hours a day, and you can sign up for email notifications and online messages to help you manage your tax affairs.
If you have never filed a tax return online previously, you must create an HMRC online account.
When you join, HMRC will send you an activation code, which can take up to 10 working days to arrive (or up to 21 days if you live abroad), so plan ahead of time. In addition, you will be given a user ID and a Unique Taxpayer Reference (UTR).
If you previously filed a return but did not do so last year, you must register again. Gather the necessary details before applying online for Self Assessment.
You’ll need your UTR, National Insurance number, and, if applicable, an employer reference. Your P60 end-of-year certificate, P11D expenses or benefits, P45 information of leaving work, payslips, and/or your P2 PAYE coding notification may be required.
Now, you’re ready to tackle how to fill in a tax return online form.
You’ll need your bank or building society statements, as well as your profit and loss statement or other business records if you operate for yourself.
The first section requests personal information. The following question inquires as to where you have obtained income or gains, such as employment or self-employment, a corporation or partnership, properties, trusts, capital gains, or from overseas.
Answer “Yes” to any of the boxes in this section to demonstrate that you did get income from one or more of these sources. This will result in further queries concerning these sources of income appearing.
The third section inquires about interest earned by banks or building societies, pensions, share dividends, and perks. It is critical to include these even if you are performing an assessment as a lone trader. HMRC requires information on all of your earnings, regardless of source.
Other information requested on the form includes student loans, pension payments, gifts, charitable donations, child benefits, and marriage allowances. All of these pages, including extra pages, are explained in further detail in How to Fill Out Your Tax Return. However, if anything is unclear, contact HMRC for assistance.
Send no receipts, accounts, or other paperwork to HMRC in support of your Self Assessment return unless specifically requested. Even so, just send copies and keep the originals safe.
You are responsible for the information you give, so take your time filling out your return information. Enter the figures with care and double-check everything before clicking the submit button. In your reply, include as much information as possible. You can store the information you enter on each screen as you go, allowing you to resume your work later.
You can edit figures at any time before clicking the final submit button. Keep a copy of your final return and a copy of your receipt. If there are substantial differences between this year’s return and last year’s, explain why in the section for more information.
Assuming you file on time, you must maintain records of all information required to complete your Self Assessment tax returns, including your accounts and other information. Self-employed individuals should maintain this for up to five years after the 31st of January each year.
If HMRC comes knocking, a hefty penalty may apply for each failure to retain or preserve proper records.
Penalties for Filing Late
There are penalties for filing and paying tax returns late. The fines are outlined below.
#1. Late filing penalty
- Up to 3 months late: Automatic penalty of £100
- 3-6 months late: A daily fee of £10 for up to 90 days (total penalty of £900).
- 6-12 months late: 5% of tax due, or £300 (whichever is higher), on top of the penalties above.
- 12 months+: A further 5% or £300 penalty, in addition to the above, but HMRC may fine you 100% of the tax due.
HMRC agreed to extend the late filing penalty owing to the epidemic. The 2.3 million people who did not file their tax returns by 31 January 2022 were allowed an extra month before being charged with a £100 penalty. However, interest began to accrue on February 1st.
#2. Interest on late tax payments
In addition to the penalties listed above, you will be charged 2.75% interest on any unpaid taxes.
Interest will be levied on both delinquent taxes and penalties, so the charges can quickly add up.
#3. Making a mistake on your self-assessment tax return
You do have the opportunity to review your return and amend any issues before submitting it.
REMEMBER: You can make modifications to your return until the following year’s self-assessment filing date.
So, for the 2022-23 tax year, you have until January 31, 2024, to correct errors on your return. If you miss such deadlines, you must notify HMRC of any modifications.
How to Pay Your Tax
When filing online, HMRC will tell you how much tax you owe once you have finished your Self Assessment return.
Each of the two payments on account is equal to half of your tax bill from the previous year. If you still owe tax after making your account payments, you must submit a balance payment by midnight on January 31 of the following year.
Allow two working days for the transaction to clear if you pay your tax bill with a debit card.
You can use HMRC’s budget payment plan if you choose to pay more frequently throughout the year, such as weekly or monthly, but only if your previous payments are up to date and you are paying in advance.
Online or telephone banking (faster payments), CHAPS, debit or corporate credit card online, your bank or building society, BACS, direct debit (if you have previously set one up with HMRC), or by check through the post are all options for paying your tax.
What is Self Assessment?
The UK government requests details of single trader or partnership revenue in order to assess the relevant tax due. Typically, you will either fill out a paper form or finish one online through the HMRC website.
When Should I Complete a Self Assessment Tax Return?
Assume you have earnings from jobs that aren’t taxed at the source, such as PAYE on your main employment. In that situation, activities like freelancing, landlord (even if it’s just a room in your house or a holiday let), or a sole trader business or side hustle that surpasses £1,000 per year must be declared to HMRC.
This includes any interest you earn on taxable assets, such as dividends from investments or savings account interest.
Conclusion
You should be feeling a little more secure about filling out and submitting your tax return online by now. If you decide to do it yourself but are still unsure, you may always contact HMRC and ask them to double-check your response.
This is important since filing your tax return wrong could result in fines and penalties.
While many small businesses eventually hire an accountant, it may be worthwhile to perform your Self Assessment for the first year at least—you will save money and have a better grasp of how the tax system works in the future.
Planning is the key to filing on time. Making time for Self Assessment preparation now will result in a less stressful encounter.
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