A Guide to Self Assessment Tax Returns​

Self Assessment FAQs

What are Self Assessment tax returns?

The Self Assessment system is one of the ways HMRC works out how much we owe. There are several reasons why you might need to file one, even if your income's already taxed through Pay As You Earn (PAYE). Under PAYE, tax is deducted automatically from your wages, pensions and savings – but that’s not necessarily all the money you have coming in. People and businesses with other income have to report it in a Self Assessment tax return.

Self Assessment’s designed to be as straightforward as possible, but it's very easy (and often expensive) to get it wrong. Most people choose to handle their Self Assessment online, but it's possible to do it on paper if necessary. Here are a few key pointers to getting it right:

• If you're self-employed, be sure to keep your business records handy when the time to file comes.
• You'll need to understand how your payments on account work. These are advance payments against your next tax bill, and they can cause a lot of headaches.
• It's essential to understand what you can (and can’t) claim on your expenses each year. Allowable expenses bring down the tax you owe, but claiming the wrong amount can be costly and dangerous.

Who needs to file a Self Assessment tax return?

It's not just the self-employed who need to worry about Self Assessment tax returns. For example, you’ll also need to submit one if:

• You’ve received £2,500 or more in untaxed income, like money from renting out a property or savings and investments.
• Your savings or investment income was £10,000 or more before tax.
• You made profits from selling things like shares, a second home or other “chargeable assets” and need to pay Capital Gains Tax on them.
• You were a company director - unless it was for a non-profit organisation (e.g. a charity) and you didn’t get any pay or benefits, like a company car.
• You're a nominated business partner. When you set up a Partnership and get it registered with HMRC, one of you becomes the "nominated partner". If that's you, it's your responsibility to manage the business partnership's tax returns.
• Your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit.
• You had income from abroad that you needed to pay tax on.
• You lived abroad and had a UK income.
• You got dividends from shares and you’re a higher or additional rate taxpayer.
• Your income was over £100,000.
• You were a trustee of a trust or registered pension scheme.
• You got a P800 form from HMRC saying you didn’t pay enough tax last year, unless you paid what you owed through your tax code or a voluntary payment.
• You make over £1,000 a year from selling things online.
• You want to make voluntary Class 2 National Insurance contributions to make sure you qualify for things like the State Pension.

Why should I file my Self Assessment tax returns online?

Filing tax returns online is the fastest and safest way of keeping on the right side of HMRC. You don't have to wade through pages of questions that don't apply to you, have looser deadlines and cut out all the postal hassles. Filing online means your tax gets calculated automatically and you'll get any repayments you're owed faster. You'll see instantly what tax you owe, and will be able to correct mistakes before they become problems.

Here are a few things you need to know about Self Assessment tax returns:

• You need to register in advance to use the online system. You'll get an activation code, but it can take a while to get set up. Don’t keep the taxman waiting!
• You can register on the HMRC website with your 10-digit Unique taxpayer Reference number (UTR) and your National Insurance number or Post Code.
• The deadline for filing is the 31st of October for paper returns. Online returns have until the 31st of the following January. There are painful penalties for submitting even a single day late, so filing online gives you much more time to get the work done.
• With online filing, you get an automatic acknowledgement from HMRC that your return's been received. If you're sending a paper return you won't get that, so you'll need to get proof that you posted it in case of problems.

What if I can't use Self Assessment online?

There are a few kinds of people who can't use online Self Assessment, and have to file their tax returns on paper.  For instance, MOD personnel with certain clearance levels need to use paper returns. It’s more work and stress overall, but with the right preparation you can still get it done this way.

How to register for Self Assessment

When you start working for yourself, registering for Self Assessment is Job One. You've got to do it as soon as possible, and you'll get fined if you wait too long. The deadline for registration is the 5th of October in your business' second tax year. Don't miss it!

The easiest way to register for Self Assessment is by doing it online. Here's how:

• Visit the HMRC website and create a Government Gateway account.
• You will then receive your Unique Taxpayer Reference number (UTR).
• You will also receive an activation code to log into your account for the first time.
• You can then complete the registration form.

You can also send your registration form by post, but you've still got to go online to download the form anyway.

What business records do I need to keep for self-employment?

When you're self-employed, you have to keep records of a few things for HMRC. Here are some of the basic details to keep track of:

• All the money you've got coming in. That includes receipts, electronic sales records or till rolls, if you use them. Keep backups of everything.
• Any money you spent on your business. Business expenses are a huge part of getting your taxes right. Again, hold onto your receipts and invoices.
• If you bought or sold any assets for your business, keep a record of them.
• If you took any money out of your business for personal use, or paid any of your own in, make sure you've got records.
  
  

Depending on the kind of business you're running, there may be other specific things to record. In general, though, things like copies of bank statements are always worth hanging onto. If you don't have a separate business bank account, make sure you keep things organised. You'll need to know which expenses are business-related and which aren't. Remember to include things like travel costs, where they're specifically for your business.

If you've got employees, make sure their wages are properly accounted for. The same goes for money paid to subcontractors. If you keep stock, make sure it's all recorded.

Don't throw your records away after you've filed your return, either. You'll usually need to keep them for 5 years to be safe - but in some cases it might be longer.

What other documents do I need to file a Self Assessment tax return?

When you’re filing a Self Assessment tax return, you’re taking a selfie of your finances. Here are a few of the most important documents to hold onto:

• Form P45, if you stopped working for an employer during the tax year.
• Form P60, showing what tax you've paid.
• Form P11D, if you get any "benefits in kind" like a company car.
• Records of any Taxed Award Schemes or redundancy payments.
• Records of extra income like untaxed tips, incentive payments or benefits like meal vouchers.

Keeping records of your savings and investments is another vital part of filing a tax return.  Here's what you need:

• Interest and income from all your savings and investments.
• Statements and passbooks for bank and building society accounts.
• Any tax deducted by your bank.
• Dividend vouchers from UK companies.
• Unit trust tax vouchers.
• Any profits from life insurance policies.
• Any income you've received from a trust.
• Any inheritance you receive.
• If you're receiving a pension, you'll also want:

If you're receiving a pension, you'll also want:

• Form P160 (Part 1A), from when your pension started.
• Form P60, which you get annually from your provider.
• Any other pension details and the tax deducted.

How long do I need to keep my Self Assessment tax records?

For one-off tax returns, you should hold onto all your records for at least 22 months after the end of the tax year they refer to. That's assuming you got your tax return in on time. If you submitted late for some reason, then keep hold of everything for 15 months after you sent in your return.

If you're self-employed the rules are a little different. In this case, you need to keep it all for at least 5 years after the submission deadline. It's always possible the taxman will want to check your homework. If he does, you'll need to be ready to prove everything you've said in your tax return.

How do I pay my Self Assessment Tax?

Once you've submitted your Self Assessment return and found out what tax you owe, you can pay by:

• Direct Debit.
• BillPay.
• Bank giro credit at your bank or Post Office.
• Telephone, with your debit card. HMRC no longer accepts personal credit cards.
• Post.

HMRC can sometimes collect your tax through your tax code if you're employed as well as self-employed.  It depends on how much you owe and how much you earn through employment.  Either way, you'll have to tell HMRC that you want to do it.

I have a student loan and am self-employed. How is my repayment collected?

Payments toward student loans are handled through your normal Self Assessment paperwork. Anything you owe will be included with your main tax bill. Watch out if you're paying late; the fines will be the same as if you'd missed the tax deadline.

If you're making payments on account (advance payments on your tax bill), your student loan payments won't be part of them. Remember that you can make voluntary payments directly to the Student Loan Company if you want to. Those won't be included on your tax return, though, and won't reduce your actual tax bill.

What happens to my Self Assessment if I'm paying into a pension?

Depending on the type of pension scheme you're using, making regular contributions to it can change your tax calculation. If you're getting a pension while you’re still in work, you may have to file a Self Assessment tax return even if you’re not self-employed.

• Employer's scheme: the basic pension plan. You don't have to do anything, as it's all taken care of at source.
• Private pension: this option takes a little more paperwork. You'll still be taxed on your full income, but can claim tax relief to top up your pension contributions.
• Salary sacrifice: this is where you're taking a reduced salary in return for pension contributions from your employer. This can cut down your National Insurance payments.

What are Self Assessment payments on account?

Payments on account are payments towards your next year's income tax. The amount you have to pay for each payment on account is half of your previous year's tax bill. So, if your previous year’s tax bill was £2,500 (you only have to make payments on account if your tax bill is over £1,000), then each payment on account would be £1,250.

This is HMRC's way of spreading out the money you'll owe in your next tax bill over the year. They can be quite a shock the first time you're asked to pay them. However, they're really just designed to make paying your tax a little less painful.

What if I know I'll owe less tax next year?

If you're sure your payments on account will amount to more than you'll owe in your next bill, you can get them reduced. You'll need to be pretty certain about it, though. You can make the application through your Self Assessment account or by sending form SA303 to HMRC.

Self Assessment tax return guide - dos and don'ts

If you're not used to filing Self Assessment tax returns, they can seem like a nightmare. Here are a few tips to help you pick your way through unharmed.

• DO get yourself registered for the Self Assessment system as soon as possible. You'll need a Unique Taxpayer Reference (UTR) number, and they'll only send it by post. It can take a while, so don't wind up missing a deadline just because HMRC's still stuck in the Stone Age. You'll also need an account and activation code for the Government Gateway site if you want to file online.

• DON’T ignore the deadlines or assume it's okay to be a few days late. If you reach February and still haven't filed your return, you'll be walloped with a £100 fine. That's just for starters, of course. Seriously - don't leave it too late.

• DO let the taxman know if you've got a genuine reason for missing the deadline. If it's really not your fault, he might give you a little breathing room. Don't count on catching him in a forgiving mood, though - and make sure your excuse is a good one. A major illness might get you off the hook for a week or two. A bout of the sniffles won’t.

• DON’T assume that you've been asked for a tax return by mistake. It can happen, but ignoring the demand just because it's unexpected is always a mistake. If you can prove you don't need to file a return, HMRC will back off. Until you do, though, they'll be expecting your paperwork on time.

• DO file your Self Assessment return even if you know you won't owe any tax this year. It doesn't matter how little you earned, the taxman still wants to know about it.

• DON’T assume that HMRC doesn't care about your hobby selling stuff on eBay or Etsy. If you're doing enough of it, they'll call it a business and expect a Self Assessment tax return from you.

• DO remember to file your Self Assessment return, even if you folded your business this year. You need to make sure your books are up to date until the very last day you were trading.

• DON’T think you can skip over the Self Assessment pages about renting out property just because you make a loss on it. Whether you're up or down on the deal, you've got to account for the money.

What common mistakes do people make on tax returns?

Filling out a Self Assessment tax return can be daunting and difficult. They're often loaded with technical jargon, and mistakes can cost you. Here are some common blunders to watch out for.

Mistake #1: The simple things
It’s often the simplest details that trip people up. You might have calculated every last penny of every last expense. You might have kept and organised all your bank statements and payslips. However, all that care and effort mean nothing if you forget to sign and date your paper tax return. With any documents you’re sending, check whether you have to use the original form or if a scan or photocopy is okay - or whether the taxman needs a physical signature.

Quick tip: Filing online might be a smart move to avoid easy mistakes like this.

Mistake #2: Skimping on details
What HMRC want from your tax return is a complete overview. They won't be satisfied with anything less. Skipping over things you aren't sure of or writing "details to follow" will only land you in hot water. Always use cold, hard numbers when they're asked for.

Quick tip: Remember you can save your progress on the returns website. If you're waiting for exact figures or details, you can always come back and fill them in later. Just remember to get it all finalised before the deadline.

Mistake #3: Getting your sums wrong
Another obvious one. If HMRC ask for a figure, they mean they want the EXACT figure. Don't guess or estimate. Get it right and double-check it.

Quick tip: The website forms will do quite a lot of the actual calculations for you. Consider getting professional help if you’re still not sure.

Mistake #4: Missing a deadline
This is a big one. Paper tax returns have to be filed by the 31st of October. If you're doing it online, you've got until the 31st of January. The fines for missing a tax return deadline start at £100 for being even a single day late. After that, things just get worse.

Quick tip: Once more, filing via the website gives you a little extra breathing space. Remember to check your account details on the HMRC site regularly. You'll see at a glance what deadlines might be looming.

Mistake #5: Fiddly details
This is a broad category, and there are a lot of tiny details that can catch you out. For example, make sure your National Insurance number and Unique Taxpayer Reference (UTR) number are correct.

Quick tip: If you lose track of your UTR, you can find it on any correspondence you get from the taxman. Even if you can't remember it, he will.

Mistake #6: Messy expenses calculations
Claiming your expenses correctly is a huge part of getting your tax return right. There are strict and complicated rules about what counts as a business expense. Don't cut corners learning them. The taxman has no sense of humour when people claim for things that aren't allowed.

Quick tip: This mistake can cut both ways. A lot of people miss out on expense claims they could make, and end up paying way too much tax

Mistake #7: Not telling the whole story
It can take a lot of work to fill in all the blanks when your finances are complicated, but it's worth it. Remember that this information can actually save you money or qualify you for tax relief. Depending on your situation, you might have to give details of things like:

• Life insurance gains.
• Stock dividends.
• Income from property.
• Any benefits you're claiming.
• Income from savings and pensions.

Quick tip: The Self Assessment tax return form has a space for "additional information". Remember to use it if you need to add details not covered by the rest of the form.

Mistake #8: Not doing your homework
Filing a Self Assessment tax return means paperwork. From the money you've got coming in to the miles you're travelling, you need to get used to keeping good business records.

The taxman isn't interested in seeing a rough outline of your finances. He wants the full picture. If you're claiming expenses, you need receipts. If you're billing clients, you need invoices. Depending on the business you're in, there could be a range of details to keep track of. You've got to be able to prove everything you say in your return.

Quick tip: If you're working PAYE and filing a tax return, you need to keep your records for at least 22 months after the end of the tax year. If you're self-employed, you need to hang onto them for 5 years!

Expats and foreign income

I'm an expat. Do I still have to pay UK tax?

If you're living or working abroad, you may still have to pay UK tax on some or all of your income.  It all depends on where the money's coming from and what your tax residence status is. Generally, you only pay UK tax on foreign income if you're a UK resident.  There are specific rules about what counts as UK residency, but they basically boil down to:

• Did you spend 183 days or more in the UK during the year you're being taxed on?
• Did you own or rent your sole home for 90 days or more in the UK, and spend at least 30 days there?

If you answered yes to either of these, then the chances are you're a UK resident in the taxman's eyes.

Do I have to pay tax on income from abroad?

If you've got money coming in from abroad, you'll usually have to pay UK tax on it. You'll generally do this by filing a Self Assessment tax return. There are rules on the types of income that count, and a lot depends on your status as a UK resident.

With money from abroad, the important thing to remember is that HMRC still wants to hear about it. You'll need payslips, bank statements or payment confirmations for income, of course. If you're getting dividends from overseas companies, there'll be certificates to show the taxman. If you've already paid tax on your income from abroad, you'll need to show proof of that, too.

Of course, the other side to this coin is that keeping records of your overseas business expenses can bring down your UK tax bill. Don't miss out by throwing any of it away.

What kinds of foreign income will I pay tax on?

Your foreign income might include wages from working abroad, or things like overseas rental money or foreign investments and savings. In most cases, your foreign income will be taxed in the same way as your UK money. However, there are special rules for pensions, property rental and jobs like working on a ship or for the government.

What's my residence status and what does it mean for my tax?

You generally only pay UK tax on foreign income if HMRC considers you a UK resident. That basically means you either:

• Spent 183 days or more in the UK during the year you're being taxed on.
• Owned or rented your sole home for 90 days or more in the UK, and spent at least 30 days there.

If your residence status changes during the tax year you might be able to get "split-year treatment". This means you'll only pay tax on the money you made as a UK resident. There are a few conditions to meet, though. If you come back after living abroad for under a tax year, you won't get split-year treatment.

I live abroad. Why should I pay UK tax?

Even expats living permanently overseas sometimes find themselves in HMRC's sights. For example, you might have to pay UK tax if:

• You're a director of a UK company.
• You're getting rental income in the UK.
• Some or all of your work is done in the UK.

In most cases, you'll find yourself filing a Self Assessment tax return for any income that qualifies for UK tax.

What's a non-domiciled resident, and what does it mean for UK tax purposes?

Usually, your ''domicile'' is the country where you have your permanent home.  Weirdly enough, it's possible to be a UK resident with a permanent home abroad.  It's called being “non-domiciled'', and there are special tax rules about that.

For expats, you might still be considered to have a ''deemed domicile'' in the UK under certain conditions.  For instance, for Inheritance Tax, being a UK resident for 17 of the last 20 years might make it your deemed domicile.

The rules can be tricky, but you need to be on top of them. You really can't afford to go on guesswork here.

What's the ''statutory residence test''?

HMRC uses a standard residency test to decide whether you qualify for UK tax. Your tax residence status depends mostly on the number of days you spend in the UK, along with some other factors. For example, you're automatically considered a non-UK resident if:

• You were in the UK for under 46 days this year, AND...
• You were a non-UK resident for the last 3 years.

How do I know what UK tax I have to pay?

Generally, you'll sort out your UK tax with a Self Assessment tax return. You can do it online by registering with HMRC and getting a Unique Taxpayer Reference (UTR) number. Don't ignore a demand from HMRC, or assume it was a mistake. Even if you end up not owing any UK tax, you might still have to file a return.

There are hard-and-fast deadlines for filing a Self Assessment return, and for paying any tax you owe. Penalties start at £100 for filing even one day late, so don't leave it too long!