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What is self-assessment tax?
HMRC or Her Majesty’s Revenue and Customs collects income tax by two methods. One is by the system of PAYE, i.e. Pay as you earn. The other method is by way of self-assessment.
In the PAYE method, the income tax is automatically deducted from your salaries before you receive it. However, if you earn through self-employment, you need to pay the income tax return by self-assessment for the respective financial year with self-declaration for the inputs.
Who needs to pay the self-assessment tax?
A tax return is to be filled if you have sources of untaxed income. If you were self-employed in the last tax year and your revenues were more than £1000, or you were a part of a business partnership.
However, you may also need to fill out the self-assessment tax return if you have any other income sources, including payments from renting out a property, grants like the COVID-19 grant, or any other support payments, tips and commission, savings interest, or foreign income. You are also entitled to pay a tax return if the mileage expenses of your car are more than £2500. Also, if you are a non-UK resident and earning revenues in the UK, you must file a tax return.
These other sources of income must be reported to Her Majesty’s Revenue and Customs by self-assessment.
When to file the Self-assessment tax return?
The self-assessment tax return form must be filed at the end of every tax year. The tax year begins on April 6 and ends on April 5 the next year.
How to fill the self-assessment tax return?
The self-assessment tax return can be filed out via online or paper format.
You might fill out the online form through the HMRC portal or any income tax return software.
Records such as bank statements and invoices or business income and expenditure records must be kept in case of self-employment or sole traders. These records may also include your rental income, dividend statements, or social interest. HMRC may require these documents to analyze your tax return on your income.
However, if you are a company director and need to file a tax return, you must also have your P60 and P11D.
The income tax will be calculated on the basis of your self-assessment by HMRC. You would also receive a bill by post if you filed the tax return on paper.
You will also require a UTR (Unique Taxpayer Reference), an 11-digit payment reference, before making the payment. UTR is provided on your HMRC account or the paying-in slip provided to you by HMRC. You must also gather information about your tax code.
One must register themselves with the HMRC before October 5.
What are the ways to pay your tax bill?
You can pay your tax return through online banking or telephone banking. You can pay the income tax by faster payment methods, CHAPS, or through a corporate debit card or a corporate credit card online. They are usually processed on the same working days. However, you cannot use your personal debit card or credit card to make the payment.+
Payment through Bacs requires three working days to be processed. You can also directly make the payment by cash or cheque by submitting a paying-in slip at your bank branch. The paying-in slip will be available from HMRC.
If you make the payment through a cheque or direct debit, you must ensure that the payment reaches HMRC before the last working day.
You can also pay your self-assessment tax bill through your PAYE tax code if the tax return on your account is less than £3000 or your tax return is already paid through PAYE by your employer.
Types of Tax Return
You can file the tax return by online self-assessment tax return or filling out the form SA100.
Here is a list of forms for non-individuals.
- Non-resident companies need to file the SA700.
- Trust and estates need to file the SA800.
- Business partnerships need to file the SA900.
- Trustees for registered pension schemes need to file the SA970.
The supplementary pages are needed to be filed before sending the tax return. Here is a complete list of these supplementary pages.
- Self-employment SA103S or SA103F
- Property income SA105
- Foreign income SA106
- Non- UK residents SA109
- Business partnerships SA104S or SA104F
- Employees SA102
Claim your child benefit
If you or your partner receive a child benefit, it must be informed to HMRC. If either of the two earns an income higher than £50,000, and they receive a child benefit, they are entitled to pay the high-income child benefit tax charge. It is necessary to pay an equal amount even if the child is not yours but is living with you.
However, if you do not seek to pay the tax charge, you must not claim the child benefit. Otherwise, you must pay the tax charge at the end of each tax year.
When to pay your tax bill?
Payment on your tax bill can be made monthly or weekly. You can set your Budget payment plan on the online portal of HMRC. You can also pay your self-assessment tax in installments. However, you must set up a Direct Debit to set up the plans.
What are the deadlines to pay your tax bill?
The first payment on your account, also known as balancing payment, is to be paid before January 31. The second payment must be made by July 31.
To avoid any penalty, you must fill out the tax return before the deadline, i.e. January 31. However, if your payment is late, interest will be charged. You might also require to pay a penalty of £100 after three months of late payment.
Where can you view your self-assessment tax bill?
The individuals or business partners can view their self-assessment tax return on their Personal tax account. It generally takes 72 hours to process the information on your tax return account after the payment of your tax return.
