Self Assessment Tax Returns

Who needs to complete a tax return?
If you pay tax on your earnings through the UK Pay As You Earn (“PAYE”) system, as a Contractor this would typically be if you are working through an Umbrella Company or on an Agency’s payroll, tax is deducted automatically and self-assessment is not usually necessary.

But if your tax affairs are more complex, you may need to complete a self-assessment tax return. This could be because you are self-employed, a Company Director or you have foreign or rental income.

You will also have to complete a tax return if you are an employee being paid through PAYE, but your annual income is more than £100,000 per year, you receive untaxed income of more than £2,500 per year, you have annual investment income of at least £10,000 or claim £2,500 or more in expenses in a tax year.

How does it work?
The standard tax return is a ten-page form, which most people will receive directly from HM Revenue & Customs (“HMRC”), this asks for information on income from employment and other earnings, savings, investments, state benefits and pensions. It also covers allowances and tax reliefs for which you may be eligible, such as work expenses. There are also nine supplemental pages that you fill in if your income comes from elsewhere, such as land and property.

HMRC will then work out your tax bill (though you can work it out yourself if you wish) and send you a statement showing what you have paid, what you owe and a set of payment dates.

The forms can be completed on paper or online, however if you miss the filing deadlines you will face penalties and interest charges. If you think that you need to file a tax return, for example if you have recently become self-employed or a landlord, it is your responsibility to contact your local tax office as soon as possible.

Key dates to remember
Soon after the start of each new tax year (April 6) HMRC will send out a tax return for the previous tax year to everyone who normally completes one. Once you have received your Tax Return, there are some important dates you need to remember:

September 30: this is the deadline for filing your paper Tax Return if you want the Revenue to calculate your tax for you in time for the January 31 payment deadline.

October 31: this is the final date to file paper Tax Returns; however you will have to calculate your own tax liability. If you miss this deadline, you will have to file online or face a penalty from HMRC.

January 31: this is the final deadline for online tax returns and to pay any tax and national insurance due.

Some tips for completing your Tax Return
The main thing to remember for avoiding any Tax Return penalties, is good record-keeping and allowing yourself plenty of time. Before you begin to fill in your Tax Return, gather together all the relevant paperwork that you will need to complete your Tax Return. This will include document such as; your P60 if you’re employed or receive a pension, your P11D if you have received any fringe benefits or expenses.
If you are self-employed or have rental income, you will need copies of your accounts and expenses. You will also need your bank statements if you receive interest on your bank account, plus details of any income from investments and savings.

Simple errors can be costly, one of the most common is forgetting to sign the form, this can mean that your return is rejected, and if this means that you miss the filing deadline, you could be faced with a penalty. Be sure not to make basic errors, such as putting a decimal point in the wrong place. Always read and re-read the form to ensure that you have not made any mistakes or left anything out. Keep copies of your completed Tax Return along with everything else that you send to HMRC.

If you are not comfortable completing your own Tax Return, you can hire an accountant to complete the form for you, but this will usually cost around £100, significantly more if you have complex tax affairs.

Fines and penalties
You will receive a penalty from HMRC of £100 if you fail to meet the January 31 filing deadline. If your return is still outstanding six months later, you will be charged a further £100.

If you miss a payment, HMRC will charge interest at 7.5 per cent from the date that the payment was due, on top of the late-payment penalty. If you still have not paid by the end of February, you will be charged a 5 per cent surcharge on the tax due, which rises by a further 5 per cent of the amount due if you still have not paid by July 31.

You can get help on completing your self assessment Tax Return by downloading Tax Return forms and help sheets, direct from HMRC’s website or you can call the HMRC helpline on 0845 9000444 (+44 161 931 9070 if you are calling from abroad) .

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