You have probably heard of a self-assessment tax return. But what is it, and how do you know if you need one?
Many people have trouble figuring out if they need to file a tax return.
However, your first experience with filing a self-assessment tax return doesn’t have to be hard. So we made it easy for you.
If self-assessment tax returns confuse you, and you want to find out whether you need to submit one, keep reading. This article will answer all off your questions, so let’s dive right into it!
What is Self Assessment?
Self Assessment is the system used by the Her Majesty’s Revenue and Customs (HMRC) to collect income tax.
The vast majority of employees pay taxes through the Pay As You Earn (PAYE) system. This system deducts your taxes automatically every time you receive a paycheck from your employer.
But not everyone gets their paycheck through an employer. Also, some people must submit tax returns for other reasons.
Who Needs to Submit a Self Assessment Tax Return?
As a general rule, anyone outside of an employer’s PAYE system must file a self-assessment tax return. This includes people who are self-employed or doing freelance work.
So, if you don’t have an employer that deducts taxes from your paycheck, you will have to submit a return.
But don’t think you’re out of the blue just yet. You may also need to submit a tax return if:
- You or your partner makes more than £50,000 and claimed child benefits
- Your income for the year exceeded £100,000
- You had more than 2,500 in untaxed income
- You had savings or investment income of £10,000 or more (before tax)
- You need to pay capital gains tax
How to Send Your Tax Return
You have the option to send a paper form. However, the HMRC encourages people to do it the fast and easy way: submit your return online.
Once you make an account, the HMRC will send you an activation code through the post. The code will likely take several days to arrive. When you receive it, you can log in to your account.
New self-employed businesses must register with the HMRC. You can do this online, post, or phone.
Make sure you don’t leave any of this until the last minute, as it can take several weeks for the entire process to finish.
The tax year starts and ends in the first week of April. You will owe a fine of £100 if your return is less than 3 months late. You can use a calculator to estimate your penalty if you are more than 3 months late.
There you have it: the self-assessment tax applies to workers who are outside of an employer’s PAYE system.Submitting a tax return isn’t that hard—especially if you are well organized. You can even do it from the comfort of your own home.
Just remember that if you ignore this tax, you will receive a fine. So do not delay the process. There are ways to reduce your bill, and you may be eligible for an exception. If you need any professional tax advice, or if you have any questions, feel free to contact us.[ABTM id=218786]