The concept of self-assessment tax returns has continued to cause problems in recent and current years, as people continue to seek clarity on their tax obligations. As of 2022 the self-employment rate in the UK was 13%, the lowest its been since 2009. Yet even with decreasing numbers, the support from HMRC continues to remain absent and majority of self-employed tax payers feel lost with understanding how to navigate self-assessment requirements.

What is a Self-Assessment Tax Return?

Self-assessment tax returns are the method used for reporting your income and paying tax to HM Revenue and Customs (HMRC). If you are employed, your income tax is usually deducted at source, via your employer, from your wages. But if you are self-employed or you receive any additional income, you will need to submit a self-assessment tax return each year to declare and then pay income tax and National Insurance owing on the additional income.

There are two ways you can submit your tax return:

  • Online
  • By post

Who Needs to File a Self-Assessment Tax Return?

Typically, if you’re employed under a company, your employer will handle your tax through the Pay As You Earn (PAYE) system..

You will likely need to complete a return if:

  • You’re self-employed and your income was more than £1,000
  • You’re a company shareholder
  • You earned £100,000+
  • You had savings or investment income of more than £10,000
  • You received income from abroad
  • You earned more than £50,000 and claim child benefit
  • You earned £2,500 or more in untaxed income, e.g. renting out a property

Key Deadlines to Remember

One of the most searched aspects of self-assessment tax returns we we have noticed are the associated deadlines. Missing a deadline can result in penalties and fines, so it makes sense that this is the are UK tax payers are revolved around.

For clarity there are a few dates worth knowing:

  • The tax year runs from April 6th of one year to April 5th of the next.
  • Paper tax returns are due by October 31st after the year ends.
  • Online returns are due by January 31st after the year ends and this is also the date you should pay your tax bill by.
  • Final date to know is if you make advance payments towards your tax bill (known as ‘payments on account’) the second payment deadline is 31st July.

Penalties if your Self-Assessment is late

If you don’t meet the submission deadline for your self-assessment tax return, you will be issued a £100 penalty. Continued delays add a charge of £10 daily, capped at £900.

On top of this, if you are late paying your tax, you’ll be charged:

  • 5% of the tax unpaid after 30 days
  • Another 5% of the tax unpaid after 6 months
  • Another 5% of the tax unpaid after 12 months

Common Pitfalls to Avoid

While the process might seem straightforward, It is very clear that individuals often overlook certain aspects of the self-assessment tax return process:

  1. Not Keeping Records: You should keep records of your income and expenses, which will make the process of filing a return or responding to HMRC queries smoother.
  2. Overlooking Allowable Expenses: Many self-employed individuals miss out on claiming allowable expenses, which can reduce their tax liability. That’s when having a good accountant comes into play.
  3. Waiting Until the Last Minute: It’s always advisable to start the process early. Despite the fact HMRC appears to have taken this summer off. It’s encouraged you don’t.

In my view, grasping the ins and outs of your self-assessment tax returns is necessary for those not in conventional employment. I believe that staying well-informed, orderly, and ahead of the curve can make the tax filing journey much less daunting.