Most people have straightforward tax affairs that are dealt with through the Pay As You Earn system. However, for some people the process is more complex and a self-assessment tax return is required.
Self-assessment is used by HMRC to collect the correct amount of tax from those who have income that doesn’t have tax deducted at source. There are deadlines for submission of a tax return, depending on the type of income. If you submit a paper tax return, it has to be received by HMRC by 31st October, while the online variant has to be received by 31st January.
Who needs to submit a tax return?
A tax year runs from 6th April one year to 5th April the next. If during the previous tax year you were self-employed, you will need to complete a tax return. You should inform HMRC immediately if you start a business, so that you can be registered with the self-assessment system.
If you receive £2,500 or more of untaxed income in any year, like income from property, you will have to be registered under self-assessment. If the amount received is less than £2,500, you may be able to include this amount as a deduction in your tax code rather than complete a tax return each year. However, if the amount exceeds £2,500 at any time, you will need to fill in a return.
Some people who are in receipt of child benefit may have to complete a tax return. If one partner’s income exceeds £50,000 and you receive child benefit, you must register for self-assessment.
Those with income from overseas, or individuals living abroad but receiving income from the UK, will also require completion of a self-assessment tax return.
If you sell any property, like a second home or other chargeable assets, you may be liable to pay Capital Gains tax, so would need to complete a tax return. Anyone with income above £100,000 also has to fill in a tax return with details of their income.
There are many circumstances that require the completion of a tax return. However, in some instances, a self-assessment tax return may not be necessary so you should always check first, either with HMRC or your accountant. Some income can be included in your tax code as a deduction.
If you want to know more about the criteria for self-assessment, contact us today for more information.