Every year certain taxpayers must complete a tax return declaring their income and capital gains while claiming any applicable allowances and reliefs. Despite a large portion of the UK population having tax deducted automatically from wages, pensions, and savings via the Pay As You Earn (PAYE) system (for employees), individuals with other sources of income must report it in a tax return. Technically, Self-Assessment is the system HM Revenue and Customs (HMRC) uses to collect this Income Tax.
You are required to file a tax return for the 2020/21 tax year (6th 2020 to 5th April 2021), if any one of the following factors are relevant to you:
You can also fill self-assessment to:
If you want to make voluntary Class 2 national insurance contributions to qualify for certain benefits, you can use the self-assessment system to make this payment.
You are required to inform HMRC if you meet any of the previously mentioned criteria and register for self-assessment by 5th October.
It is worth bearing in mind that there are separate ways to register for self-assessment for the following categories:
Contact Spondoo Accountants if you are unsure which category you fall into.
To register for self-assessment, you must have:
After registration, HMRC will send you a Unique Taxpayer Reference (UTR) number by post. You will use your UTR number to register for HMRC online services. The letter containing the UTR number also contains steps on how to set up a Government Gateway account. Following the creation of an online account, HMRC will send you an activation pin, by post, which you will use to complete setting up your account.
After registration, you can send your tax return via any of the following:
To fill in your self-assessment tax return, you will need your:
You must keep these records for at least 6 years.
Income tax for the self-employed is calculated on the profits, in simple terms, your total sales after deducting expenses.
Should you submit online tax returns, HMRC’s online system will automatically calculate your tax. You can view the calculation online or print it out. However, if you wish to submit paper returns, you must submit your paper tax return before 31 October and request HMRC to calculate your tax. It can easily be done by ticking the relevant box on the tax return. HMRC will in turn calculate your tax and send you form SA302 (a tax calculation form).
These are the tax rates for the 2021/2022 fiscal year (6 April 2021 to 5 April 2022)
|Personal allowance||0%||£0 to £12,500 you will pay zero income tax on your profits|
|Basic rate||20%||£12,501-£50,000 you will pay 20% tax on your profits|
|Higher rate||40%||£50,001-£150,000 you will pay 40% tax on your profits|
|Additional rate||45%||Over £150,000 you will pay 45% tax on your profits|
You can read our full guide on income tax and self-employed NIC (National Insurance Contributions) rates.
We have created this handy table for the 2021/2022 tax year that clearly illustrates the deadlines – to help you not miss a date.
|Register for Self-Assessment if you are:
||5 October 2021|
|Paper tax returns||Midnight 31 October 2022|
|Online tax returns||Midnight 31 January 2023|
|Paying the tax, you owe||Midnight 31 January 2023|
If your total tax bill is over £1,000 and 80% of the total tax for the year was not collected via PAYE, then your payments on account (payments on account- add link) deadline is 31st July.
Deadlines can differ in certain scenarios like:
Bear in mind that failure to meet HMRC deadlines attracts penalties.
You don’t have to wait until January to file your returns, and there are some benefits to filing your tax return early.
You stand to benefit in the following ways:
Rushed tax returns are prone to errors. Filling early will help you recognise errors with time left to address them.
Fast-approaching deadlines attract premium rates from accountants. Why wait for the rush hour when you can pay lower fees by being early?
Did you know Spondoo Accountants has a transparent payment policy on a fixed fees basis? Go through the Spondoo Accountants packages and their fixed price on self-assessment.
January 31st (the time when your tax bill is due) to October is enough time to structure your funds and set aside your liable tax. The earlier you submit, the sooner you’ll know how much you are due – and how to budget for it.
The self-assessment registration process can take a while, especially during peak times in January. If you register early, you will have all the time to keep all your records in order. You can also utilise faster response times from HMRC call centers because they will not be crowded with all taxpayers trying to submit their returns. To beat the lengthy ‘musical’ hold times, it is best to do everything early on.
If you qualify for a tax refund, why wait longer to get what you are due? HMRC will process your refund faster and efficiently because less people are applying at this time. Tax refunds are a major boost to businesses’ cash flow.
Missing deadlines for submission and payment of tax returns warrants penalties. For example, if your tax return is just 1 day late, you will have to pay a whooping £100 in late filing fees!! Overdue payments of more than three months attract more charges. You should also not forget that HMRC charges interest on past due payments.
Although there are some changes to the penalties due to Coronavirus, here is more information on the various penalties:
If you would like assistance from a professional tax agent that can submit your return and deal with HMRC on your behalf, free feel to speak to our accountants for more information.
Call us today at 02033 259 341 or contact us via mail.