Who has to complete a self- assessment tax return?
For large numbers of UK taxpayers, all the tax they owe is deducted at source via the pay-as-you-earn (PAYE) system, so there is no need to fill in a tax return. However, around 10 million people a year need to complete a self- assessment tax return. This number has increased in recent years following changes to the Child Benefit rules and as more people have moved into self-employment.
Specifically, you will need to fill in a tax return if:
- You’re an employee or pensioner with an annual income of £100,000 or more;
- You’re self-employed, a business partner or a director of a limited company;
- You have a pre-tax investment income of £10,000 or more;
- You’re a ‘name’ at the Lloyd’s of London insurance market;
- You’re a minister of religion;
- You’re a trustee or representative of someone who has died.
You will also usually be sent a tax return if:
- You have untaxed income – from investment, land or property, or from overseas;
- You make capital gains above the annual exempt amount (£11,100 for the 2015-16 tax year);
- You were required to complete a tax return last year;
- You’re a pensioner who gets reduced age-related allowance, though you may be sent a special short version of the form that requires fewer details.
Completing a self-assessment tax return
Anyone who receives a self-assessment tax return from HMRC is legally obliged to complete and submit it, either by post or online. If you think you should be covered by self-assessment but do not receive a tax return, contact HMRC to check whether you need the form.
The deadline for filling in the paper version of the tax return is 31 October. After this you can still file your tax return online. The deadline for this is 31 January in the year following the end of the tax year:
- 31 January 2017 for the 2015 – 16 tax year,
- 31 January 2018 for the 2016 – 17 tax year.
Filling in a tax return online is relatively straightforward, even if you have not done it before. But you need to plan ahead in order to meet the deadlines and avoid the fines and penalties potentially payable if you’re late.
Settling your tax bill
The principle of self-assessment is that you are responsible for
paying the rig
ht amount of tax at the right time. The self-assessment form enables you to make a complete return of all your income over the course of the financial year, as well as all the tax you have already
paid, and to claim any tax reliefs or allowances that you are due.
With the return completed, you must then settle any tax that is due, typically by 31 January in the year following the end of the financial year covered by the form – by 31 January 2016 in the case of the 2014-15 tax year, for example. You may also need to make advance payments on the bill for the next tax year, known as payments on account. These are due on 31 January and 31 July each year.
Hit the deadlines to avoid the fines
The self-assessment system features strict deadlines by which you must submit your tax return and pay any tax that is due. Miss these deadlines and you may face penalty charges
HMRC sends out self- assessment tax returns shortly after the end of the tax year each April. The deadlines by which the forms must then be returned to HMRC vary according to how you intend to file your return and whether you intend to calculate your own tax bill:
31 October – This is the deadline for filing a paper tax return, whether you choose to work out how much tax you owe yourself or want HMRC to do it.
31 January – This is the final deadline for online tax returns, unless HMRC issues a notice to make an online tax return later than this date.
If you miss the 31 January deadline, you will automatically be fined £100, even if you have no tax to pay. The longer you delay, the higher the fine you’ll have to pay:
Three months late: a fine of £10 for each following day up to a 90-day maximum of £900. This is in addition to the fixed penalty, so the overall fine could be up to £1,000;
Six months late: a further fine of either £300 or 5% of the tax due, whichever is the higher;
12 months late: another £300 fine or 5% of the tax due, whichever is the higher.
Late tax payment penalties
The deadline for paying tax for the 2015-16 tax year is
31 January 2017. If you don’t file your return by this deadline, you’ll be charged interest from the date the payment was due. If any of the tax bill remains unpaid by 28 February 2017, you’ll incur a 5% surcharge. Another 5% is imposed on any of the tax bill still unpaid by 31 July 2017.