Self Assessment is the mechanism HMRC uses to collect Income Tax. Tax is usually deducted automatically from wages, pensions and savings. However, individuals and businesses must report other income in a tax return, depending of their situation.
In what case does Self Assessment apply to you ?
You must send a tax return if in the last tax year you were self-employed as a sole trader and earned more than £1,000 (before taking off anything that you can claim tax relief on) or if you are a partner in the business for example. Other situations could also mean you need to assess yourself, such as being a company director receiving dividends or living in the UK and earning income from overseas.
You will not usually need to send a return if your only income is from your wages or pensions. However, you may need to send one if you have other earnings such as rental income, tips and commissions, as well as income from savings, investments, dividends or foreign income.
What are the deadlines and penalties ?
Online returns must be submitted by the 31st of January. However, any tax you owe must also be paid by that date. Individuals use self assessment tax returns to provide HMRC with the information needed to calculate any tax they owe, and to do that they will have to provide certain documents and information to their accountant or tax adviser.
If you do not make the payment in time you will receive penalties. The longer you don’t pay the tax you owe, the bigger the penalties gets. You will be charged a £100 penalty if you fail to submit your return by the 31st of January deadline, even if you have no tax to pay. Further penalties of £10 a day are applied after three months, up to a maximum of £900. After six months, you’ll get a further penalty of 5% of the tax owed or £300 (which ever is greater), which is repeated after 12 months.
If you need help with your Self Assessment Tax Returns or if you are not sure whether this applies to you then please contact us so we can help you.
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