Eight things you need to know about the self-assessment tax return
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1. What is a self-assessment tax return?
The self Assessment tax return is a practice used by the HM Revenue and Customs (HMRC) to collect Income Tax. On a general note, they are automatically deducted from pensions, wages and savings. But, individuals and businesses with additional sources of income, such as support payments, Covid-19 grants, and rented properties, must report their income to the HMRC and submit a self-assessment tax return.
2. Who is eligible to file a self-assessment tax return?
You must send a self-assesment tax return to the HMRC department if you are:
- self-employed and enjoy the status of a ‘sole trader’, and your earrings are higher than £1,000 (before making the deductions you can claim under the tax relief)
- a partner in a business partnership
- Not self-employed, but you have a good source of income. For example, you receive income from renting out a property.
3. Important deadlines to note
- April 5: end of the tax year
- April 6: start of the tax year
- January 31: deadline to file your tax return online and pay your tax bill.
- October 5: deadline to register for self-assessmen.
- October 31: deadline for paper tax returns.
- July 31: Freelancers, business owners and contractors must focus on “payments on accounts” dates in January and July.
- December 30: Submit your online return if you want tax collected through your wages or pension over the next year using your tax code.
4. What kind of penalties are imposed?
The HMRC might charge some penalties on you if you don’t adhere to the guidelines. Although, you may amend your tax returns after submitting them.
- Late filing penalty
- Interest on late tax payments
5. How to register for self-assessment tax return
- Go to the HMRC Sign-in
- Click on the green-coloured “sign in” button.
- On the following page, click on “create sign-in details”.
- Enter your email address.
- You will receive your Government Gateway account User ID via e-mail. Using this, you can manage your tax account online.
- You will receive your unique taxpayer reference (UTR) by post.
- The account activation code will be sent in a separate letter.
- NOTE: usually, the activation code should arrive within ten working days. It is not absolute, and it may take additional time.
- There is an option to register through the post; you must fill out the SA1 form online and print it out to post it.
6. How to file your tax return?
To help you with your self-assessment tax return, we have prepared a checklist of the things you need to have with you:
- The National insurance number (NIC)
- The unique taxpayer reference (UTR), which is of ten digits
- The exact amount and other details of any untaxed income for the corresponding tax year. The source of it can be self-employment, interest on savings, dividends from shares, or money earned by renting out property.
- The P60 records and other similar documents reveal the tax amount already paid by you on your income.
- The notes must be presented in the case of charitable or pension contributions.
- The list of expenses related to self-employment can be deducted from your taxable profit.
The tax return is divided into two sections:
- The main section: includes income, pensions, charitable donations and benefits.
- Supplementary pages: this applies to individuals having an income to declare from self-employment, property rents, investment profits, money earned as a company director, a foreign national (or dual resident), or income from abroad.
7. How to pay your self-assessment tax bill?
After you file your return, in some time, you are going to receive a tax bill which will have a component known as the “balancing payment”. You can view this at different times depending on the mode you use for filing returns.
- Online returns – you can view the amount you owe to the HMRC before clicking the submit button. After filing a self-assessment return, you will even receive a final tax calculation online.
- Paper tax returns – your tax executive is going to return your bill through post services to HMRC.
8. Do I need to declare a SEISS grant?
If you have taken any government aid amidst the pandemic in the form of SEISS grants, you must declare that and pay income tax and self-employed National Insurance contributions on that amount.
You must make sure to put it on your self-assessment:
- The first three SEISS grants must be declared in the 2020-21 tax return under the self-employment section.
- The last two grants must be declared on the 2021-22 tax return.
What impact will it have on the payments on account?
If your self-assessment tax amounts to £1,000, you need to pay 50% amount upfront and the latter 50% in July.
“If your income is higher in a given tax year, which triggers the payments on account, you can reduce those to a lower figure or nil if you do not expect to have the same level of profits next year.
“For example, if it is a one-off profit in a given year. You can elect to do this on your tax return”, mentioned Neil Lancaster, a partner at Blick Rothenberg.
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