Do You Need to Submit a Self-Assessment Tax Return?
Employees usually have their income tax deducted at source through Pay As You Earn (PAYE). The employer will deduct the tax from their employee’s salaries and automatically pay it to HMRC. In most cases employees are not usually required to complete a self-assessment tax return.
For the majority of self-employed people who don’t have their tax deducted at source, a self-assessment tax return must be submitted to HMRC so they can be taxed correctly on their earnings.
Over 12 million people must submit a self-assessment tax return this tax year and you must submit one if you fall into one of the below categories:
- Limited company director receiving untaxed income such as dividends
- Self-employed as a sole trader and earning more than £1,000 (before taking off anything you can claim tax relief on)
- Partner in a business partnership
- Receiving PAYE income over £100K in 2022/23 or £150K from 2023/24 onwards.
- Receiving child benefit and your income or your partner’s income was over £50,000
- A higher or additional rate taxpayer and paying into a personal pension
- Earning additional untaxed income above a certain threshold, such as dividends or bank interest.
- Receiving rental income from property
- Wanting to claim certain tax reliefs.
- Have sold assets in the tax year, such as additional properties, crypto, shares or investments held outside of an ISA wrapper and have realised taxable capital gains.
Around 96% of tax returns are submitted online with the remaining 4% submitted on paper.
There may be other factors specific to your situation that would require you to submit a self-assessment tax return. It’s advisable therefore to consult with an accountant or check the HMRC website to determine your specific tax obligations.
The submission deadlines are 31st January for online returns and 31st October for paper returns.
Why do you need to complete a Self-Assessment Tax Return?
HMRC uses your self-assessment tax return to accurately calculate your tax liabilities each year and determine that you’ve paid the right amount of tax. This includes any amounts you have overpaid, and therefore whether a rebate is due, and any amounts you have underpaid.
Self-assessment tax returns promote transparency in the tax system as well as helping to ensure fairness.
HMRC calculates your total income using the information submitted in your self-assessment tax return which is then used to determine your tax bill. Here are some examples of what would be considered when determining your tax liability.
- Any income earned either working for an employer during or before you began working for yourself (this will be detailed on a P60 or P45 if applicable)
- Any salary received from a limited company that you are a director of.
- Interest earned on money in your personal bank accounts – excluding ISA’s.
- Any profits earned in a self-employed capacity.
- Any profits made from renting out additional properties that you ownÂ
- Any tax that has been paid already as a deduction from your income, such as via a PAYE role will be offset against your final tax liability.
- Any tax relief that you are entitled to, such as charitable donations made with gift aid or pension contributions made to a personal pension separate to any employments.Â
It is worth noting that the additional relief for charitable donations or personal pension contributions will only be given if you are a higher rate or additional rate taxpayer (total taxable income above £50,270 for the 2023/24 tax year).
In addition to the above student loan deductions and a high income child benefit tax charge may also apply but this depends on your personal circumstances.
What are the penalties for late or inaccurate submissions?
If your self-assessment tax return contains errors or inaccuracies, or if it’s filed after the deadline, it’s possible that you will receive a penalty from HMRC.
The penalties for submitting your self-assessment tax return late are:
- 1 day late – You must pay a penalty of £100
- 3 months late – You can receive a penalty of £10 a day for a maximum of 90 days (£900)
- 6 months late – You can receive a further penalty of 5% of the tax you owe or £300, whichever is greater
- 12 months late – You can receive a further penalty of 5% of the tax you owe or £300, whichever is greater. It’s possible that you have to pay up to 100% of the tax you owe
The penalties for paying your tax late are:
- 30 days late – 5% of the tax owed at that date
- 6 months late – A further penalty of 5% of the tax owed at that date
- 12 months late – A further penalty of 5% of the tax owed at that date
Penalties for errors and inaccuracies in your self-assessment tax return are derived using a behaviour-based system which is outlined below.
- If the error is due to a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due
- For deliberate errors, the penalty will be between 20% and 70% of the extra tax due
- For deliberate and concealed errors, the penalty will be between 30% and 100% of the extra tax due
The challenges of completing your own Self-Assessment Tax Return
Completing your own self-assessment tax return can present various challenges. The difficulty is dependent on several factors including how complex your financial affairs are, the quality of your record keeping, how comfortable you are with numbers and your knowledge of tax regulations.
Completing your own tax return involves understanding tax rules and regulations which can be very complex to someone unfamiliar with them. For example, you’ll need to establish which income sources must be included, which expenses can be claimed and your tax liability will need to be accurately calculated.
In addition, tax legislation is also dynamic and constantly evolving which makes keeping abreast of the latest changes and current regulations challenging for self-employed people. Failing to comply with the latest regulations can result in errors and penalties.
Completing a self-assessment tax return can also take a significant amount of time, something that can be in short supply for self-employed people! You’ll need to collate all relevant financial information, get your records in order and complete the necessary forms while ensuring accuracy. Keen attention to detail is needed.
If your self-assessment tax return becomes overdue, HMRC will issue you with a late filing penalty starting at £100. This charge will increase depending on how long it takes to complete and file your late submission, and the costs can quickly increase. HMRC will rarely waive penalties for late submissions irrespective of whether any tax is due.Â
Once you know your tax liability, you can make a payment from your online bank into HMRC’s account. It can be paid over the phone, from your bank or building society branch or by cheque.
Even innocent errors on a submission can be a red flag to HMRC which can bring you unwanted attention and potentially lead to a lengthy and time-consuming investigation and penalties. It’s crucial, therefore, that your submission is both accurate and on time.
Why Choose Gorilla for your Self-Assessment Tax Return?
At Gorilla Accounting, we understand that as a small business owner you will be very busy and that your time is valuable. Your focus should be on your day-to-day core activities and growing your business rather than having to spend time completing your self-assessment tax return.
The last thing you want is to waste time wondering how to complete and submit your tax return and risk getting it wrong. After all, completing it isn’t straightforward and it can be a lengthy and frustrating process.
So if you want to ensure you are paying the correct amount of tax, you should appoint a specialist tax return accountant for help.
Let Gorilla Accounting do all the work and save you time, stress and money.
If you’re looking for an accountant for tax return purposes, our qualified team of expert accountants are self-assessment specialists. We will complete your self-assessment tax return accurately, efficiently and with minimal fuss and can also advise you on minimising your tax liability to ensure that your business is as tax-efficient as possible.
Our accountants have decades of experience across many different industry sectors. This allows us to offer a dedicated self-assessment tax return service that will handle the entire process for you from start to finish. We will liaise with you on any queries, submit your tax return to HMRC on your behalf and confirm the amount of tax to be paid and when it is due.
If you’re looking for an accountant for tax return purposes, we can save you a lot of time, money and stress. We give you peace of mind that your tax affairs are in order and that your HMRC self-assessment will always be completed and submitted accurately and on time. As online tax accountants, we can help you regardless of your location in the UK as we just require copies of your records to complete your return and our self-assessment tax return service starts at just £200 + VAT for a basic tax return with no additional pages.
If you have any queries regarding your self-assessment tax return or our accounting services contact us today to speak to our friendly team to learn more about how we can help you.
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