Self Assessment 101

What is it? Who has to do it? How do I go about it?

Her Majesty's Revenue and Customs (HMRC) collects income tax from individuals via self assessment. In essence it is a form (or forms) completed either online or sent in on paper to declare all income received and calculate the income tax due.

If you are employed or receiving a pension, income tax is normally deducted before it is paid in which case it is not normally necessary to complete a self assessment tax return. However, if you have received income which has not already had tax deducted (or may have had the wrong amounts of tax deducted), you may be required to complete one.

Scenario's which may put you within scope of self assessment:

• you are self employed and run a business with more than £1,000 of earnings

• you are a partner in a business partnership

• you receive income from renting out a property

• you receive tips or commissions

• you have income from savings, investments and dividends (not ISAs)

• you have income from a trust

• you have foreign income

You can check if you need to complete a self assessment tax return here.

If you do need to complete a self assessment tax return, you will first need to register for self assessment. How you do this will depends on your circumstances. Here are the links for the registration process:

• register if you're self employed or a sole trader

• register if you're not self employed

• register a business partner or partnership

If you are in scope, you have until 5th October following the end of the tax year (6th April) to register.

You will receive a Unique Taxpayer Reference (UTR) (usually within 10 working days). You can then create an online account with HMRC and sign up for the self assessment service. You will then need to wait another 10 working days to receive an activation code to use your online account to file your self assessment tax return. If you are using an accountant or bookkeeper, you can authorise them to act as your agent for HMRC. They will need your UTR to set this up and once done they can take care of the rest for you.

You should allow at least 20 working days to register and set up an account before work can start on your self assessment tax return.

Self assessment is based on the tax year ending on 5th April. You can complete your self assessment tax return at any time after the 5th April but it must be submitted by the 31st January the following calendar year, any tax owed must be paid by this date too (paper returns have an earlier deadline of 31st October). Failure to meet the deadlines will result in penalties and possibly interest payments.

Read more:

• Making Tax Digital (MTD) for income tax self assessment

• Self employment and self assessment

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The information contained within in this article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice specific to your own circumstances from your own adviser.

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