Everything you need to know about the self-assessment tax return

With the end of January looming, the deadline for filing your self-assessment tax return is fast approaching. Here’s everything you need to know!

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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Anyone who earns money in the UK must pay tax on their income. For small business owners, freelancers and self-employed workers, the deadline to declare their tax is fast approaching! The self-assessment tax return form is a government requirement that must be completed for every tax year. Here’s everything that you need to know ahead of the January deadline.

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What is the self-assessment tax return?

The self-assessment tax return is a system used by HMRC to collect income tax. If you are required to complete a self-assessment, the deadline is 31 January. Failure to submit your return on time will result in penalties.

The self-assessment is a document that can be completed either online or via post. As a result, you will need access to your financial records in order to complete the assessment correctly. Therefore, it is a good idea to keep track of all in-comings and outgoings throughout the tax year.

Self-assessments are completed each year to ensure that the correct tax is paid. Moreover, the assessment replaces automatic tax reductions that are taken from wages, pensions and savings.

Who is required to complete a self-assessment?

Anyone who is self-employed as a ‘sole trader’ and earned more than £1,000 in the previous tax year must complete a self-assessment tax return. You must also complete an assessment if you are a partner in a business partnership.

However, you do not need to complete a self-assessment if the tax you pay is automatically deducted from your wage, pension or savings. However, you may need to send an assessment if you have a secondary source of income. This could include:

  • Investments and dividend stocks
  • A rental property
  • Tips or commission
  • Foreign income
  • Income from a side hustle

What happens if you miss the deadline?

If you do not send your self-assessment by midnight on 31 January, you could receive a penalty.

If your return is up to three months late, you will have to pay a fine of £100. However, this will increase if your return is more than three months late. Payments or self-assessments that are sent after more than three months after the deadline are subject to interest. Furthermore, late tax payments will be charged 5% interest on the tax that is due or a flat fee of £300.

However, self-assessments for the 2020/2021 tax year will not receive any late filing penalties up until the 28th of February 2022. This is due to coronavirus restrictions that may disrupt the filing process.

Additionally, sole traders will not receive any late payment penalties until the 1st of April 2022. However, you will still be charged interest on the tax that you owe from the 1st of February 2022.

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Can you make changes to your self-assessment?

You are able to make changes to your tax return up to 72 hours after filing it. If you need to make changes after this time, you will need to write to HMRC and explain the changes that are required.

Moreover, changing your self-assessment information could result in a higher tax bill. On the other hand, you may be able to claim a refund for excess tax that has been paid.

How to register for a self-assessment tax return

If you did not send a return last year, you will need to register. Anyone who did send a self-assessment last year will not need to re-register online.

Self-employed sole traders need to register for both the self-assessment and class 2 National Insurance by 5 October in your second business year. This can be done through your business’s tax account. To access this account, you will need your Unique Taxpayer Reference (UTR).

Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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