Self Assessment – the rules

Most people are aware of self-assessment tax returns however there can be some confusion about the rules regarding these.  

So we thought we'd provide a brief guide.

What are the deadlines for self-assessment tax returns​?

If you're filing a paper return then your return must be with HMRC by midnight on 31st October.  So your paper tax return for 2014-15 must be with HMRC by 31st October 2015.

If you miss filing a paper return then you must file an online return.​

The deadline for an online return is 31st January the following year eg for your 2014-15 tax return the deadline is 31st January 2016.​

Miss this deadline and you'll pick up a £100 penalty - even if you don't have any tax to pay.  And the longer you leave it, the more penalties you will clock up - if you're more than 3 months late you'll start racking up a daily penalty of £10 a day (up to a maximum of 90 days) and if your return is more than 6 months late you'll pay a further penalty of 5% of the tax you're due to pay or £300 - whichever is greater).

And the penalties are even more severe if you are over a year late.  So it's well worth making sure you get your return in to the taxman on time!​

Do you need to file a return?

If you’ve been sent a self-assessment form, or received notification you need to fill one in since the end of the tax year, then yes, you do.

But, if you haven’t received a form, there are still some special circumstances that mean you could need to file one.

If your tax is deducted by your employer, you usually don't need to submit a form unless you get additional income from a second job or freelance work, or have been caught up in the changes to child benefit. Since 7 January 2013, all parents with incomes above £50,000 who receive child benefit payments have to pay a tax charge based on their income and how much of the benefit they received in the relevant tax year.

If HMRC has asked you to complete a tax return but you don't think you need to, tell it as soon as possible. You'll have to pay a penalty if you simply don't send one in.

If you haven't received a notification, you should get in touch with HMRC if you fall into one of the following categories, as it's likely you'll need to file a return:

  • You're self-employed
  • You're a partner in a business partnership
  • You're a company director
  • Your annual income is £100,000 or more
  • You have income from property
  • You have income from savings or investments that has been taxed and was £10,000 or more before you paid tax on it
  • You have income from savings or investments that hasn't been taxed and is £2,500 or more (bank account interest is usually taxed automatically)
  • You need to claim expenses or reliefs
  • You or your partner receive child benefit and your income is more than £50,000
  • You get income from overseas
  • You have income from trusts, settlements or estates
  • You have capital gains tax to pay
  • You've lived or worked abroad or don't live in the UK permanently
  • You're a trustee

How do you register to file online?

To file online, you first need a login.

If you've had one for previous years, this will still be valid.

To register for a login for the first time, visit the HMRC website. Ensure you allow enough time before the 31st January deadline, as it can take up to seven working days for HMRC to send you an activation code by post.

What do you pay and when?

On 31st January most self-assessment tax payers will pay any tax due for the previous tax year as well as a 'payment on account' for the next tax year.  The 'payment on account' is normally half the expected tax for the next tax year - and is normally based on what you paid in the previous tax year (although you can get HMRC to adjust this if you think it's wrong and can give a valid reason - but beware, there is interest to pay if you reduce your payment on account and it's later found to be higher!).

So, let's tax an example.  Let's assume your tax bill for the 2013-14 tax year is £2500.  On 31st January 2015 you'll have to pay £2500 (less any payments on account you made for the 2013-14 tax year) plus 50% of this amount as a payment towards your 2014-15 tax bill.  So you'll pay a total of £3,750.

In addition, you'll make another payment on 31st July 2015 which will be the other half of your 2014-15 tax bill.  So by 31st January 2016 hopefully you'll have paid all your tax - but if you haven't, you'll need to make an additional payment by 31st January 2016.

And if you've paid too much?  Well, HMRC will send you a statement and will normally send you a repayment.  However it's worth keeping on top of this as repayments can sometimes get stuck in the system!​

And when won't you have to make a 'payment on account?'

Well you only have to make payments on account if your previous year's tax came to more than £1,000. But if an employer (if you have more than one job) has already deducted more than 80% of that figure, you won't owe a payment on account for the next tax year.

And in certain circumstances, where you are employed, you can ask HMRC to collect any underpaid tax through your next year's tax code.  So for instance your 2013-14 tax could be collected through your 2015-16 tax code.  This helps spread the cashflow but you need to factor in the additional tax you have to pay.

How do you pay?

​If you want to pay your tax via a bank transfer, you can do so right up until the evening of 31st January for your previous year's tax. HMRC now accepts money under the Faster Payments system, which allows cash to go through in two hours. However, each bank has a limit on how much you can transfer under Faster Payments. The limits range from £5,000 to £100,000.

There are other ways to pay, including by debit or credit card. If you opt to pay this way HMRC will accept your payment on the date you make it, not the date it reaches HMRC's account – including on weekends. Be aware that HMRC is trialling a beta service for its debit card payment service that you may be directed to use. If you opt to pay by credit card you'll be charged a 1.4% fee.

You can find full details as to how to pay your tax here.

What happens if you're late paying?

If you're late paying your tax you'll be charged interest on the payment - currently at 3%.

And if your last year's tax bill is still outstanding on 1st March you'll be slapped with a ​5% surcharge based on your tax liability for the year concerned.  There's also a further surcharge of 5% if your last year's tax bill is still outstanding on the 1st August - and if you're over a year late the penalties can be as much as 100% of your tax liability.

How do you contact HMRC?

If you want to talk about your own tax affairs then you must contact HMRC by phone on 0300 200 3300.  At certain times you can expect long wait times, although HMRC says phone lines are less busy between 8:30am to 10:30am and 2pm to 4pm, Monday to Friday.

If you have a general query then you can contact HMRC by email, post or register for their new online chat service.

You can find out about the methods of contacting HMRC here.​

And remember, these tips are not a replacement for professional advice tailored to your precise needs and circumstances.

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