Do I need to complete a Self Assessment tax return?

Answer:

Self Assessment is not a tax – it is a way of paying tax. The idea of Self Assessment is that you are responsible for completing a tax return each year if you need to, and for paying any tax due for that tax year. It is your responsibility to tell HM Revenue & Customs (HMRC) if you think you need to complete a tax return.

If you complete a Self Assessment tax return, you include all your taxable income, and any capital gains. You also claim any tax allowances or reliefs that you are entitled to on the tax return.

You send the form to HMRC either on paper or online. The information on the tax return is used to calculate your tax liability. This process is called Self Assessment.

Most people in the UK pay all their tax ‘at source’, for example, through Pay As You Earn (PAYE) if they are employed, and are not required to file a tax return. Self Assessment therefore does not affect everyone and you will normally only need to complete a form if one or more of the following apply to you:

• You are working for yourself – you are self-employed;
• You are a partner in a partnership business;
• You are a minister of religion – any faith or denomination;
• You are a trustee or the executor of an estate.

You also might need to complete a Self Assessment tax return if:

• You are a company director, if you have income that is not taxed under PAYE;
• You have untaxed income. This could be, for example, interest that is not taxed before it is paid to you or rental income. If you are an employee or a pensioner and the income is less than £2,500 a year you might not have to complete a tax return but it is still your responsibility to report such income by contacting HMRC. If you receive other untaxed income and the tax due on it cannot be collected via your PAYE coding notice you will need to complete a tax return;
• You receive regular annual income from a trust or settlement, or you receive income from the estate of a deceased person and further tax is due;
• You have taxable foreign income whether or not you are resident in the UK. This includes non-UK resident landlords;
• You have income from savings and investments of £10,000 or more before tax;
• You have annual income of £100,000 or more before tax;
• You or your partner receive child benefit and your income is over £50,000. This is because of the high income child benefit charge;
• You have tax due at the end of the year that cannot be collected via your PAYE coding notice in a later year;
• Your untaxed income is £2,500 or more – but if you are a pensioner you may be able to pay your tax through your PAYE Coding Notice;
• Your claims for expenses are £2,500 or more;
• You have capital gains.

Note that if HMRC have sent you a tax return or a notice to complete one, then you must fill it in and return it by the due date unless there is a good reason you do not need to be in Self Assessment and HMRC agree to cancel it.

The advice in this column is specific to the facts surrounding the questions posed.  Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.