Self Assessment Tax Returns: What You Need to Know
Self Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax.
If you are an employee with no other source of income it is unlikely that you will have to file a tax return as your tax is typically deducted automatically through PAYE. However, if you have a business or you have another source of income (including rental income) you must file a Self Assessment tax return.
Here’s everything you need to know about Self Assessment tax returns:
Who files a tax return
Do you need to file a Self Assessment tax return? Ignorance isn’t an accepted excuse by HMRC! Ensure you know where you stand.
You must file a tax return if, in the last tax year (6 April 2018 to 5 April 2019), you were:
- Self-employed as a ‘sole trader’ and earned more than £1,000
- A partner in a business partnership
You will not usually need to file a return if your only income is from your wages or pension. However, you may need to file a return if you have another untaxed income, such as:
- Money from renting out a property
- Tips and commission
- Income from savings, investments and dividends
- Foreign income
- Your total income was more than £100,000
If you fail to submit your Self Assessment tax return before the deadline you will receive a penalty. These are the deadlines to be aware of:
Register for Self Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership
5 October 2019
Paper tax returns
Midnight 31 October 2019
Online tax returns
Midnight 31 January 2020
Pay the tax you owe
Midnight 31 January 2020
Any outstanding tax must be paid by 31st January 2020 regardless of how you file your tax return. If you fail to pay your tax bill you will receive a penalty. If you fail to pay the penalty you will be charged interest on all late payments.
If you know you will fail to submit your tax return on time you can use the HMRC penalty estimator to estimate your penalty.
If you cannot pay your tax bill on time, you can appeal against certain penalties if you have a reasonable excuse, as defined by HMRC.
What may count as a reasonable excuse
What you consider a reasonable excuse may not be considered reasonable by HMRC. HMRC will only consider your excuse if you can prove that you took reasonable care to meet your tax obligation but something happened (outwith your control) that stopped you from meeting your tax obligation. These are accepted reasonable excuses:
- Your partner or close relative died shortly before the tax return or payment deadline
- You had an unexpected stay in hospital that prevented you from dealing with your tax affairs
- You had a serious or life-threatening illness
- Your computer or software failed just before or while you were preparing your online return
- Service issues with HM Revenue and Customs (HMRC) online services
- A fire, flood or theft prevented you from completing your tax return
- Postal delays that you could not have predicted
- Delays related to a disability you have
If you miss the deadline you must communicate your reasonable excuse with HMRC. If HMRC accepts your reasonable excuse you must submit your return or payment as soon as possible after your excuse is resolved.
If you do not pay your tax bill, HM Revenue and Customs (HMRC) will take ‘enforcement action’ to get the money if you do not pay your tax bill. That is why it’s important to contact HMRC or your accountant to give you recommendation on handling the situation and avoid enforcement action.
How to File for tax return
Filing for tax return has never been easy, you may appoint someone to do a file for you; especially, if you have accountants you can get relax with your tax. The following are records your accountant might needs from you to file your tax return:
- Employment Income
- Dividends received during the year
- Rental income
- Private pension payments
- Bank interest received
- Any other income
You should provide visibility on the income you made for last year to ensure you reported the right amount for tax return and avoid any penalty.
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