Self-assessment: don’t leave it too long!

Self-assessment tax returns need to be completed and filed by 31st January every year. But too many people leave it until Christmas, or even January, to get their books together.
Filling in a self-assessment tax return

Self-assessment: don’t leave it too long!

Self-assessment tax returns need completing and filing by 31st January every year. But too many people leave it until Christmas, or even January, to get their books together.

Although it is six months away, those who need to file their self-assessment return in 2021 should plan to have theirs filed now.

With the coronavirus lockdown, it is easy to think there isn’t much to report if your business profits were seriously affected. But you must file your return regardless of what has happened.

Filing your tax return now also means you know how much money you need to pay by 31st January. If you miss this deadline and owe money, you face penalties.

Self-assessment & Covid-19

Each year, those who file self-assessment returns have a balancing payment to make on 31st July.

This year, HMRC allowed people to defer that payment in light of the coronavirus pandemic. If you decided to defer the payment (you didn’t need to inform HMRC if you did) then don’t sit back and wait until 31st January next year.

If you do wait, you will be expected to pay both the balancing payment and your self-assessment amount. Having to pay both amounts might prove difficult, so we would advise you speak to HMRC about a ‘time to pay’ agreement.

What is self-assessment?

Self-assessment is not only for the self-employed. If you earn income other than as part of a PAYE (Pay As You Earn) scheme you must also file a self-assessment return.

This means if you are paid a wage you don’t need to fill in a return unless you get extra income outside your normal job.

So, if you’re a director of a company or rent out property you must fill in a self-assessment tax return.

Self-employed people also need to fill in a tax return. You can do this quite easily online, but using an accountant can help ensure there are no mistakes, which could cost you in the long run. Also, an accountant will ensure you are claiming all the relevant tax-deductible expenses, which in turn reduces your tax bill.

Here is a full list of the people who need to fill in a return:

  • Your self-employment income was more than £1,000
  • Your income from renting out property was more than £2,500 (you will need to contact HMRC if it was between £1,000 and £2,500)
  • You earned more than £2,500 in untaxed income, for example from tips or commission.
  • Your income from savings or investments was £10,000 or more before tax.
  • You need to pay Capital Gains Tax on profits from selling things like shares or a second home.
  • You’re a director of a company (unless it was a non-profit organisation, such as a charity)
  • You, or your partner’s, income was over £50,000 and you’re claiming Child Benefit
  • You have income from abroad you need to pay tax on, or you live abroad but have an income in the UK.
  • Your taxable income was over £100,000
  • If you earn over £46,351 in the 2018/19 tax year (£50,001 for 2019/20) and make pension contributions you may have to complete an assessment to claim back the extra tax relief you’re owed
  • You are a trustee of a trust or registered pension scheme
  • Your State Pension was more than your personal allowance and was your only source of income
  • You received a P800 from HMRC saying you did not pay enough tax last year.

How to fill in a return

Self-assessment tax returns allow you report details of your income to HMRC. After receiving your return, they work out the tax you need to pay by 31 January the next year.

You need to provide details of income as well as information about dividends and interest on shares; your expenses relating to self-employment; any contributions made to charities or pensions eligible for tax relief and records, such as a P60, for any tax you’ve already paid.

If you are new to self-assessment you need to register with HMRC first. They will then post a numeric code to you. It will be by post, so if anyone calls claiming to be from HMRC regarding your self-assessment code, do not give any personal details.

After logging in, the form takes you through the process and reacts to your answers.

For details, visit HMRC’s self-assessment page.

Failing to file or pay your return by 31st January means you face a £100 penalty. You then receive another £100 penalty after three months and £100 per day after three months! It’s really not worth delaying.

If you want your self-assessment tax return dealing with, contact us today. We can help take the hassle out of self-assessment.