Self Assessment is the mechanism HMRC uses to collect Income Tax. Tax is usually deducted automatically from wages, pensions and savings. However, people and businesses with other income must report it in a tax return depending on 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 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 pension. However, you may need to send one if you have any other earnings from renting out a property, tips and commission, income from savings, investments and dividends or foreign income.
What are the deadlines and penalties ?
Online returns must be submitted by the 31st of January but the payment of the 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 then you will have penalties. The longer you don’t pay the tax you owe, the bigger the penalties get. You will be charged a £100 penalty if you fail to submit your return by the 31 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 (whichever is greater), which is repeated at 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 that we can help you.
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