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Self Assessment Tax Returns

Your questions answered

There is a common perception amongst much of the UK’s taxpaying population that only people running their own businesses like plumbers, shopkeepers, and accountants need to complete a tax returns under the Self Assessment (SA) system.

Unfortunately, not only traders but a surprising number of people who fall under the Pay As You Earn (PAYE) system which collects tax on employment income, must also complete an annual Self Assessment tax return.

Tax Return FAQs

We examine some of the common FAQs raised about completing a tax return which will hopefully help you to work out if, and when you may need to complete one. We also include some questions and answers about the process of registering and filing a tax return.

A tax return not only lets HMRC know about your taxable income for a year but also gives you an opportunity to claim tax allowances and expenses which can reduce the amount of tax which you have to pay.

No. They must have a valid reason to issue a notice to make a tax return. These reasons are likely to relate to details of any income which you’ve received which hasn’t been taxed at source. There are also several other situations reflecting peoples’ personal and financial circumstances included in the tax law which empower HMRC to request a tax return.

The likelihood is, if you have no other forms of income, your pay exceeds £100k in a year. This means that your Personal Tax Allowance is abated, possibly to £0 and your tax code needs to reflect this.

Yes. This is one of the specific situations in which HMRC will ask you to make a tax return. It’s because, as a higher rate taxpayer, you may be subject to a clawback of tax on the Child Benefit. Details of your exact income and the Child Benefit your partner received need to be reported to determine the amount of the clawback.

If your net rental income, after expenses is more than £2,500 in a year or is more than £10,000 before expenses then you will need to make a tax return. Rental income is taxable but is not taxed at source, so you need to provide details to enable your liability to be calculated.

Although you may be paying tax under PAYE on your pension, your overseas income hasn’t been taxed in the UK and needs to be included in your total income for your overall tax liability to be worked out.

Although tips are taxable you will only need to make a formal tax return if they exceed £2,500 a year. If they are less than this figure you still need to let HMRC know each year what you’ve received. You can do this by calling the HMRC helpline or reporting the figure via your online Personal Tax Account.

If your investment income (taxed or otherwise), exceeds £10k you will need to file a tax return. The point at which you may have to pay tax is likely to change depend upon your overall income level and your personal tax allowances. You may want to seek help in working out when you will reach or have already reached the tax threshold.

If the gain (net sale proceeds less acquisition cost/value) is more than the Annual Exemption (£12,300 for the 2021/22 tax year) or the sale proceeds exceed £49,200 (for 2021/22) then you will need to report the gain via a Self Assessment tax return. To avoid having to complete a tax return to report a chargeable gain you can use HMRC’s online ‘real time’ Capital Gains Tax service.

If you can claim for expenses like a uniform allowance, tools or use of home as an office you can normally just let HMRC know by calling them or using your online Personal Tax Account. Only if your total expenses exceed £2,500 will you need to file your claim via a tax return.

Claiming higher rate tax relief on charitable donations and personal pension contributions are commonly included on tax returns along with investments in a number of tax-advantaged business schemes like SEIS which provide start-up funding and generous tax reliefs. 

Register online at the GOV.UK website if you believe you meet the criteria. You will be assigned a Unique Taxpayer Reference (UTR) which is used by HMRC to identify you.

HMRC will send you a Notice to File a tax return each year after 6 April. You can complete your return online using the HMRC website, but many taxpayers choose to use accountants or tax advisors to do so on their behalf. The return must be filed online on or before 31 January following the end of the tax year.

HMRC will impose an automatic penalty for returns which are filed late. However, they say they are more interested in encouraging taxpayers to file their return on time than raising revenue via penalties. Remember that if your tax return calculation shows that you have tax to pay that must also be paid by 31 January – interest and penalties can also be charged on the late payment of tax.

If you believe that you need to file a tax return because you have a new source of income which is untaxed, you must register for Self Assessment by 5 October in the year following the year when that income arises. There are penalties for failing to ‘notify chargeability’.

For those running a business it’s essential that comprehensive income and expenditure records are kept for business accounts to be prepared to support entries on their tax return. If you’re making a return for another reason, you still need to keep all the relevant financial records like forms P60 from your employer or pension provider, dividend warrants and statements of investment income etc.

Yes. This is quite a popular service provided by companies like PayStream. Many taxpayers with more complex or unusual circumstances such as tax residence issues often prefer to hand the whole process of return completion and filing over to an accountant or tax advisor.

PayStream can complete your tax return for you

We'll make sure that your Self Assessment is completed quickly, professionally and most importantly on time to keep you safe from HMRC penalties. That's all without mentioning the fact that we'll chase any refunds for you as well as highlighting any possible tax liabilities so you know what to expect.

Register for a tax return

Everyone's needs are different. To discuss tax returns in more detail, speak to a member of our Tax Team on 0161 923 0201 (option 3) or email taxadvisory@paystream.co.uk

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