Do I need to complete Tax return?
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Meeting your tax obligations can feel confusing and stressful at times, but it doesn’t have to be that way. We’ll simplify the method for Self Assessment tax returns in this thorough guides, leading you through the complexity of tax compliance. Whether you work for yourself, are a business partnership partner, or have untaxed income, this thorough guide provides all the information you need to verify you are following tax requirements appropriately.
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What is Self Assessment (SA)?
Self Assessment is not a tax itself but rather a method for paying tax. The core idea behind Self Assessment is that you, as an individual taxpayer, are responsible for completing a tax return each year if necessary and for paying any tax due for that specific tax year. The onus is on you to inform HM Revenue & Customs (HMRC) if you believe you need to complete a tax return.
In a Self Assessment tax return, you need to include all your taxable income, any capital gains you may have, and claim any tax allowances or reliefs that you’re entitled to. This tax return can be submitted either on paper or online, and the information provided is used to calculate your tax liability. This entire process is referred to as Self Assessment.
Who Must Complete a Tax Return
The Self Assessment process is not applicable to everyone in the UK, as most people pay their taxes ‘at source,’ typically through Pay As You Earn (PAYE) if they are employed. Self Assessment is primarily relevant to individuals who fall into specific categories, such as:
1. Self-Employed: If you operated as a ‘sole trader’ and earned over £1,000 before accounting for potential tax relief claims.
If you had self-employment income, you’re required to report it through a tax return. This includes income from freelance work, consulting, or running your own business. Even if you earned just over £1,000, it’s essential to report this income accurately.
2. Business Partnership: If you were a partner in a business partnership.
If you were involved in a business partnership, whether a limited partnership or general partnership, you are obligated to file a tax return. The partnership itself may also need to file a partnership return.
3. High Income: If your total taxable income exceeded £100,000.
If your total income, including earnings, investments, and other sources, exceeded £100,000, you must complete a Self Assessment tax return. This ensures that the HMRC can assess the additional tax liability associated with high-income individuals.
4. High Income Child Benefit Charge: If you had to pay the High Income Child Benefit Charge.
The High Income Child Benefit Charge applies to individuals with an income over £50,000 who receive child benefit. If you’re affected by this charge, you must submit a Self Assessment tax return.
In addition to these situations, you may also need to send a tax return if you have any untaxed income, such as COVID-19 grants or support payments, rental income, tips and commission, income from savings, investments, dividends, or foreign income.
However, you might also need to complete a Self Assessment tax return if you:
- Are a company director with income not taxed under PAYE.
- Earn untaxed income, such as interest or rental income.
- Receive regular annual income from a trust or settlement or income from a deceased person’s estate.
- Have foreign income on which UK tax is due, with some exceptions.
- Are a non-resident with taxable income in the UK, including non-UK resident landlords.
- Are liable for specific tax charges, such as ‘excess’ Gift Aid contributions or pension contributions.
- Owe tax on a state pension lump sum deferred before 6 April 2016.
- Incorrectly claimed coronavirus support payments that need to be repaid.
- Have untaxed income of £2,500 or more, with certain exceptions.
Additionally, HMRC may request you to complete a Self Assessment tax return for various other reasons. It’s essential to stay informed about your specific circumstances and obligations.
What are the important deadlines and dates for Self Assessment?
Understanding the important dates and deadlines associated with Self Assessment is crucial to avoid penalties. Here are the key dates you need to be aware of:
- 31 January (during the tax year): The first payment on account for the tax year ending on the following 5 April is due if you have payments on account to make.
- April (after the end of the tax year): Shortly after the tax year ends on 5 April, individuals required to file a tax return will receive a notice advising them to do so. Even if you haven’t received this notice, you may still need to file a tax return.
- 31 July (following the end of the tax year): The second payment on account for the tax year ending on the previous 5 April is typically due if you have payments on account to make.
- 5 October (following the end of the tax year): If you didn’t submit a tax return for the previous tax year but are required to do so for the year ending on 5 April, you must notify HMRC by 5 October, unless HMRC has already asked you to file a return for that year.
- 31 October (following the end of the tax year): If you are submitting a paper tax return, it must be submitted by this date to avoid penalties, even if you have no tax to pay.
- 30 December (following the end of the tax year): If you file your tax return online and want HMRC to collect the tax through your tax code, you need to submit it by this date, particularly if you owe less than £3,000.
- 31 January (following the end of the tax year): All tax returns filed online must typically be submitted on or before this date. Your balancing payment of tax is also due on this date.
- 31 January (following the end of the tax year) + 1 year: You can amend your tax return up to 12 months after 31 January following the end of the tax year if you become aware of any errors or omissions.
These dates are vital, and missing them can lead to penalties, so it’s essential to mark them on your calendar and stay organized.
What records do I need to keep for Registering and completing a Return?
Keeping records is a legal requirement for those in Self Assessment, and HMRC may request to see these records if they decide to check your tax return. Here’s what you need to know:
In Self Assessment but not self-employed:
- If you submit your tax return on time, you should keep your records for at least 22 months after the end of the tax year.
- If you submit your tax return late, you should keep your records for at least 15 months after you sent your tax return.
It’s crucial to maintain complete and accurate records to avoid potential penalties.
The general rule for the self-employed and those letting property is to keep business records for at least five years from the 31 January submission deadline.
To understand the specific records you must keep, visit HMRC’s official website for guidance.
If You No Longer Need to Send a Tax Return
If your financial circumstances have changed, and you believe you no longer need to complete a tax return, such as when you pay all your tax under PAYE, it’s essential to notify HMRC as soon as possible. You can contact HMRC using the details available on GOV.UK. In some cases, HMRC may agree to cancel your tax return if you explain your circumstances to them. This can save you from unnecessary paperwork and obligations, as well as any penalties for missing filing deadlines.
However, if HMRC does not agree to cancel the tax return, they may issue you with a Simple Assessment if they believe you haven’t paid enough tax. Even if you have not received a notice to file a return for the year, but you believe you may receive one, it’s wise to contact HMRC and let them know why you think you no longer need to complete a Self Assessment return.
If you’ve transitioned out of Self Assessment but believe you are still due a tax refund, you may need to claim a repayment of tax each year. For more information on this, refer to HMRC’s guidelines on claiming tax back.
What if Tax Return Has not Completed?
If you have not received a tax return but had income or capital gains that should have been reported, you need to notify HMRC by 5 October following the end of the tax year. Failing to do so could result in penalties. HMRC will then send you a tax return to complete.
To learn more about registering for Self Assessment, refer to GOV.UK. If you notify HMRC after 5 October but have paid your income tax liability in full by the usual 31 January payment deadline, HMRC should reduce the late-notification penalty to zero. However, make sure to file your tax return on time to avoid further penalties.
If You Need to Change Your Return
Mistakes can happen, but it’s essential to know how to correct them. Learn the process for amending your tax return if necessary.
If you discover errors or omissions in your submitted return, you can make corrections by filing an amended return. This ensures that your tax records remain accurate and up to date.
How to Get Help
Completing a tax return can be challenging, and you might need assistance. We’ll provide information on where to seek help and guidance for a smoother experience.
If you find the tax return process complex or have questions about specific elements, you can seek assistance from tax professionals, accountants, or HMRC’s helpline. They can provide guidance to help you navigate the process successfully.
Returns for Someone Who Has Died
In some unfortunate situations, you might need to complete a tax return for someone who has passed away. We’ll provide an overview of the steps involved in such cases.
When an individual passes away, their financial affairs need to be settled. This often involves filing a tax return on their behalf, addressing any outstanding tax matters, and ensuring that their estate is in compliance with tax laws.
Where can I find more information?
For more detailed information on Self Assessment, including who needs to complete a Self Assessment tax return, you can visit GOV.UK. HMRC provides comprehensive resources to assist taxpayers in fulfilling their obligations and understanding the tax system.
Self Assessment tax returns are a vital part of managing your financial responsibilities. This guide has equipped you with the knowledge to determine if you need to send a tax return and how to navigate the process effectively. Whether it’s claiming Income Tax reliefs or proving your self-employment status for benefits, understanding Self Assessment is a step toward financial
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