Income tax

Self assessment – is it for me?


Most people will have to pay income tax. Income tax is a tax charged on the earnings of an individual over the year and can come from many sources. Those who are employed will pay most, if not all of their taxes through PAYE (pay as you earn), but in some cases you will need to complete a self assessment tax return. It remains your obligation to be aware of, declare and pay any taxes due under self assessment. HMRC don’t accept ignorance as an excuse here.


Typical examples of why you might need to register for self assessment could be:


  • You are a sole trader
  • You are a shareholder of a company and are receiving dividends (this could include small owner-managed businesses, too)
  • You let out a property, earning a rental income
  • You earn interest income
  • You earn over £100,000 per annum from your employment
  • You are working in the UK, but are paid by (and taxed from) an employer in another national (known as a potential double tax)
  • You are in receipt of a pension, or grants


That list isn’t exhaustive, but it helps to explain why over 12 million people in the UK submit a tax return to HMRC each year.


If the above applies to you, you must submit a tax return and pay any tax due or risk fines and penalties. You need to file a tax return related to the preceding tax year (April 6th to April 5th the following year) by the 31st of January the year after, if you are filing online. You will also need to make sure any tax due is paid by the 31st of January too.


Depending on the tax you have to pay and how much of your income has already been collected through PAYE, you may also have to pay payments on account. This is where HMRC will require you to make an advanced payment towards your next tax bill in two halves of your existing tax bill, at the 31st of January and the 31st of July. For example, if you are a sole trader with tax of £5,000 due, you will need to pay £7,500 on the 31st of January and £2,500 on the 31st of July. That then offsets your tax bill the following year, but it does mean the amount you need to pay can be up to 150% of the bill, so planning and getting your tax return completed promptly and accurately is important.


How we can help you get your taxes right


The good news is if you’re caught by one of the above examples, then we can certainly take the burden away and make sure your taxes are filed on time, correctly.


The reasons you might need to complete a self assessment can vary. Sole traders for example could benefit by investing in software to manage their business and keep track of records, whilst high-earners may simply need to provide a P60 and P11d to us so we can prepare your return. Either way, we’ll guide you the right way.


We’ll walk you through all the process; what records are needed, what and how to pay and can even act as your agent to discuss matters with HMRC. We will walk you through your tax return so you understand every aspect of it, how your tax is calculated and ensure you have complete comfort with how we pull everything together. Once you give us the OK, we will then submit on your behalf.
For sole traders, pulling together your taxes goes hand in hand with other services you might need, such as payroll and VAT.


Issues with income tax?


Sometimes clients have come to us in the past worried they should have submitted tax returns in the past but didn’t. They might have gotten into a muddle with their papers. We completely get it – life gets in the way and priorities take over, they have been misadvised or they were just innocently unaware. We never judge either way and have helped many clients successfully get their tax matters on the straight-and-narrow so they can focus on the better things in life and get rid of the anxiety it brings.


Our advice is to always, always seek to make good and get the tax returns right, submitted promptly and accurately and pay any taxes owed as quickly as possible. It is always better to go to HMRC than have them come to you. You may have penalties, but these are much worse if they launch an investigation.


We can help you negotiate that process and, in some cases, liaise with HMRC on your behalf to get things in order.


In some cases, you can appeal penalties and fines. HMRC won’t accept a lack of understanding as a tax system as an excuse, but if you experienced exceptional circumstances causing you to file late, or erroneously, we may be able to write an appeal letter on your behalf.


If you are just not sure, let us know and we can guide you as to whether you may need to complete a tax return or not.


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