Self assessment is how HM Revenue and Customs (HMRC) collects income tax not automatically deducted from wages, pensions and savings. People and businesses with other income must report it in a tax return.
Company directors, self-employed or members of partnerships need to file for self assessment. Likewise, if you have made additional untaxed income of more than £2,500 for example by renting out property, you will also have to file for self assessment.
When is the 2019/2020 self assessment due?
Your self assessment tax return for the tax year which started on 6 April 2019 and ended on 5 April 2020 is due by Midnight January 31st 2021 if you file online. The deadline for filing a paper return was October 31st 2020. Furthermore, the tax you owe will also be due on January 31st 2021.
If you have never submitted a return before, you will first need to register for Self Assessment. It can take up to 20 working days for receiving your Unique Taxpayer Reference (UTR) in the post.
There are different ways to register if you’re self-employed, not self-employed but need to declare income, or if you’re in a partnership. The registration for 2019/2020 should have happened by 5th October 2020. To register you need your National Insurance (NI) number and personal and business details.
Who needs to file for self assessment?
You will need to file for self assessment in the following cases:
- your self-employment income was more than £1,000
- you are a director of a company (unless it was a non-profit organisation, such as a charity)
- your income from renting property exceeded £2,500
- you earned more than £2,500 in untaxed income, for example from tips or commissions
- your income from savings or investments was £10,000 or more before tax.
- you need to pay Capital Gains Tax on profits from selling things like shares
- you or your partner’s, income was over £50,000 and you’re claiming Child Benefit
- you have income from abroad you need to pay tax on, or you live abroad but have an income in the UK.
- your taxable income was over £100,000
- if you earn over £50,001 in the 2019/20 tax year (£50,001 for 2020/21) and make pension contributions you may have to complete an assessment to claim back the extra tax relief you’re owed
- you are a trustee of a trust or registered pension scheme
- your State Pension was more than your personal allowance and was your only source of income
- you received a P800 from HMRC saying you did not pay enough tax last year.
You can check if you need to file a self assessment using the government website at https://www.gov.uk/check-if-you-need-tax-return
At AcuAccounts we work to integrate the information from your company or sole trader accounts into your tax self assessment return. We will also factor in income from other investments, land or property and overseas assets if applicable.
What documents do you need to file for a personal tax return?
In order to file for self assessment online you will need to prepare the following documentation:
- your 10-digit Unique Taxpayer Reference (UTR)
- your National Insurance (NI) number
- Details of all your untaxed income from the tax year, including income from self-employment, dividends and interest on shares
- records of any expenses relating to self-employment
- any contributions to charity or pensions which might be eligible for tax relief
- P60 or other records showing how much income you received which you’ve already paid tax on
Self assessments can be filed either by yourself or by an authorised agent on your behalf, like AcuAccounts.
What is the difference between a personal tax return for self-employed and company directors?
As self-employed, you complete a self-assessment tax return and tell HMRC what profit you have made during that tax year and then you pay tax on this profit. Self-employed record expenses via the self-assessment and are taxed on profits.
In a similar fashion, limited company directors will run expenses through their limited company. A Limited Company pays tax from the moment it makes £1 in profit. However, directors can extract personal income from the Limited Company in the form of salary and dividends. This will be included in the limited company director self assessment, where the personal allowance applies.
How much tax can I expect to pay as a self-employed?
HMRC calculates Income tax for the self-employed on profits plus any other income. As self-employed you pay tax on any earnings that exceed the personal allowance. Business expenses from your self-employed work can be offset against your income from self-employment, reducing your tax bill.
The standard personal allowance for 2019/2020 was set at £12,500, which is the amount of income a person can get before they pay tax.
Can self assessment tax be paid in instalments?
You might be able to pay the bill in instalments, depending on whether you need to make payments against your latest bill or want to make advance payments against your next bill.
According to information on the HMRC website, you can set up a payment plan to spread the cost of your latest Self Assessment bill should you owe £30,000 or less or do not have any other payment plans or debts with HMRC.
It must be remembered that in case you don’t keep up with your repayments, HM Revenue and Customs (HMRC) can ask you to pay everything you owe. Not to mention you can set up a budget payment plan if you want to put aside money to cover your next Self Assessment tax bill ahead of time.
What is next?
You can file your tax return online on the HMRC website or get in touch with us to book a self-assessment consultation at info@acuaccounts.com or by calling us directly on 0203 907 9027.
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