How do I know if I need to complete a tax return and what do I need to do?
If you are self-employed, you will need to complete a self-assessment tax return every tax year, in which you will need to state (and prove) your income and any capital gains for the year.
The idea behind the self-assessment is that you, as a self-employed individual, are responsible for advising HMRC of your earnings, by completing a tax return each year if necessary and paying any tax due for that year. The information given on your tax return is used to calculate your tax liability and this process is called self-assessment.
All your taxable income and any capital gains must be stated on your tax return, you also claim any tax allowances, or reliefs you may be entitled to, via your return.
Most people in the UK pay all their tax at source, i.e. via PAYE under their employment, and therefore do not need to complete a self-assessment tax return. However, if you fall into one of the below categories, you will be required to submit a self-assessment:
- You are working for yourself and are therefore self employed
- You are a partner in a partnership business
- You are a company director (unless you’re a director for a non-profit organisation, receiving no salary)
- You are a minister of religion (any faith or denomination)
- You are a trustee or the executor of an estate
- You earn any Rental Income
You may also need to complete a self-assessment if: –
- You have untaxed income. This could be, for example, interest that is not taxed before it is paid to you or rental income. If you are an employee or a pensioner and the income is less than £2,500 a year you might not have to complete a tax return but it is still your responsibility to report such income by contacting HMRC. If you receive other untaxed income and the tax due on it cannot be collected via your PAYE coding notice you will need to complete a tax return;
- You receive regular annual income from a trust or settlement, or you receive income from the estate of a deceased person and further tax is due;
- You have taxable foreign income whether or not you are resident in the UK. This includes non-UK resident landlords. You can find out more on the UK website;
- You have income from savings and investments of £10,000 or more before tax;
- You have annual income of £100,000 or more before tax;
- You or your partner receive child benefit and your income is over £50,000. This is because of the high income child benefit charge;
- You have tax due at the end of the year that cannot be collected via your PAYE coding notice in a later year;
- Your untaxed income is £2,500 or more – but if you are a pensioner you may be able to pay your tax through your PAYE Coding Notice;
- Your claims for expenses are £2,500 or more;
- You have capital gains over and above £11,700, which is the tax free allowance for 2018/19
It is a legal requirement for people in self-assessment to keep accurate records, either on paper, or digitally. When checking your tax return, HMRC may request to see these records and can charge a penalty if they are incomplete or inaccurate.
Mad About Bookkeeping are experts when it comes to completing and filing tax returns, so if you’re unsure whether this applies to you, or if you have a bag full of receipts and scraps of paper which you know you need to keep, but you’re not entirely sure why, or what you need to do with it all, then the answer is bring it in to us, we’ll gladly sort through it all, create accurate records and file your tax return on time, no fuss, no stress.
So, don’t delay, bring in that paperwork today!