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If you are self-employed, it is your responsibility to report your annual earnings to HM Revenue and Customs. We know that tax returns can be daunting, but it is important to know your duties, and stay compliant with the latest regulations to avoid costly penalties. In this blog, we talk you through everything you need to know about registering for self-assessment.
What is Self-Assessment?
Self-Assessment is a system used by HMRC to collect income tax from those who are not part of an automatic tax system like Pay As You Earn (PAYE). Those who are self-employed, business partners, and anyone with alternative sources of income that are not automatically reported to HMRC need to self-report their income by registering for and filing a Self-Assessment tax return.
The Self-Assessment tax return shows how much you have earned, and from what sources, over the course of a tax year. It also allows you to claim income tax reliefs and benefits where applicable.
How do I know if I need to register for Self-Assessment?
You will need to complete a Self-Assessment tax return if in the last tax year:
- You have earned more than £1000 through self-employment as a sole trader
- You are a part of a business partnership
- You have earned more than £1,000 from renting out a property that you personally own
- Your income from savings was over £500
- You have some forms of foreign income
These are the most common circumstances where individuals are liable to register and complete Self- Assessment tax returns. However, this list is not exhaustive.
The most accurate way of determining whether you need to complete a tax return is by completing the Self-Assessment questionnaire on the GOV.uk website.
I am both employed and self-employed – do I still need to register for Self-Assessment?
Yes. If you are working on a self-employed basis alongside your employment you will need to complete a Self-Assessment tax return in order to declare the income procured as a sole trader unless your trading income was less than £1,000 in the financial year.
How do I register for Self Assessment?
If you have never submitted a Self Assessment Tax Return before, or did not submit a return the previous tax year, you will first need to register for Self- Assessment. There are four different ways of registering:
- As self-employed
- Not self-employed but need to declare income
- As a partner or partnership
- As a director of a company
You can find more details about the requirements for each form of registration on the Government’s website.
Once you have registered, you will receive a Unique Taxpayer Reference (UTR) number within 10 days, which you will need to file a tax return. Your UTR letter will also contain details on how to set up a Government Gateway account, which you’ll need if you would like to complete your tax return online.
Self Assessment Deadlines and Penalties
Tax returns are submitted in relation to tax years, which start on April 6 each year and end on April 5 the following year. The last tax year ended on April 5, 2021. The deadlines for the upcoming tax year are as follows:
- If you have not completed a tax return in the last tax year, your Self-Assessment Registration needs to be completed by 5 October 2021
- Paper tax returns need to be submitted by midnight, 31 October 2021
- Online tax returns need to be submitted by midnight, 31 January 2022
- You’ll need to pay the tax you owe by midnight, 31 January 2022
Failing to meet these deadlines will result in penalties and interest fees on late payments. A £100 late filing penalty applies if your tax return is late. For delays of over 3 months, a larger penalty may apply.
If you have a reasonable excuse for late filing or late payment, you can submit an appeal against the penalty. You can find out more about penalties on the GOV.uk website.
Self Assessment Support and Tax Advice with ARB Accountants
We know that the process of registering and completing your Self-Assessment can be a stressful ordeal. Our Self-Assessment Service is designed to help you understand and navigate your tax returns, from registration to payment. Our chartered accountants will ensure that your tax returns are filed correctly and on time, and that you stay compliant with the latest regulations. Book your free consultation today to find out how ARB Accountants can help you stay on top of your finances.