Self-assessment- registration, filling, rates, and penalties

What is self-assessment? 

Every year certain taxpayers must complete a tax return declaring their income and capital gains while claiming any applicable allowances and reliefs. Despite a large portion of the UK population having tax deducted automatically from wages, pensions, and savings via the Pay As You Earn (PAYE) system (for employees), individuals with other sources of income must report it in a tax return. Technically, Self-Assessment is the system HM Revenue and Customs (HMRC) uses to collect this Income Tax. 

Do I need to file a self-assessment tax return? 

You are required to file a tax return for the 2020/21 tax year (6th 2020 to 5th April 2021), if any one of the following factors are relevant to you: 

• Was a limited company director (excluding not-for-profit companies). 
• Were self-employed and earned more than £1,000 before expenses. 
• Received more than £2,500 in untaxed income from tips and commissions. 
• Your investment and savings income were £10,000 or more before taxation.
• Are a trustee of a trust or registered pension scheme. 
• Received more than £10,000 from dividends. 
• Had to pay Capital Gains Tax on profits from selling chargeable assets like shares or a second home. 
• Had a taxable income of over £100,000. 
• Received an income of more than £300 from outside of the UK. 
• Either your income or your partner's income was over £50,000 and you claimed Child Benefit. 
• You made an income of more than £2,500 by renting out property. 
• Were served a P800 from HMRC claiming you paid insufficient tax in the last financial year. 

You can also fill self-assessment to: 

• Claim income tax relief. For example, if you are a higher or additional rate taxpayer and make pension contributions via the Relief At Source Mechanism. You must complete a self-assessment to claim back the higher and additional tax relief owed to you. 

• Demonstrate you are self-employed to claim Tax-Free Childcare or Maternity Allowance. 

If you want to make voluntary Class 2 national insurance contributions to qualify for certain benefits, you can use the self-assessment system to make this payment. 

How to register for a self-assessment tax return 

You are required to inform HMRC if you meet any of the previously mentioned criteria and register for self-assessment by 5th October. 

It is worth bearing in mind that there are separate ways to register for self-assessment for the following categories:  

• The self-employed (sole traders)
• Not self-employed 
• Those registering a partner (or partnership).  

Contact Spondoo Accountants if you are unsure which category you fall into. 

To register for self-assessment, you must have: 

• National insurance number 
• Your personal details 
• Business records. 

After registration, HMRC will send you a Unique Taxpayer Reference (UTR) number by post. You will use your UTR number to register for HMRC online services. The letter containing the UTR number also contains steps on how to set up a Government Gateway account. Following the creation of an online account, HMRC will send you an activation pin, by post, which you will use to complete setting up your account.  

How to fill in a self-assessment tax return  

After registration, you can send your tax return via any of the following: 

• Online through the HMRC website
• Using commercial software 
• On paper, by post 

To fill in your self-assessment tax return, you will need your: 

• Unique Taxpayer Reference (UTR) 
• National Insurance number 
• P60 or other records showing already taxed income & benefits. 
• Untaxed income information from self-employment, dividends, and interest on shares. 
• Records of expenses relating to self-employment. 
• Contributions to charity or pensions that are eligible for tax relief. 

You must keep these records for at least 6 years.  

If you need help to fill and file your self-assessment, contact Spondoo Accountants private client team. You can also read a more detailed guide on filling self-assessment on the HMRC website. 

What are self-assessment tax and national insurance rates? 

Income tax for the self-employed is calculated on the profits, in simple terms, your total sales after deducting expenses. 

Should you submit online tax returns, HMRC’s online system will automatically calculate your tax. You can view the calculation online or print it out. However, if you wish to submit paper returns, you must submit your paper tax return before 31 October and request HMRC to calculate your tax. It can easily be done by ticking the relevant box on the tax return. HMRC will in turn calculate your tax and send you form SA302 (a tax calculation form). 

These are the tax rates for the 2021/2022 fiscal year (6 April 2021 to 5 April 2022) 

You can read our full guide on income tax and self-employed NIC (National Insurance Contributions) rates. 

Self-assessment deadlines 

We have created this handy table for the 2021/2022 tax year that clearly illustrates the deadlines - to help you not miss a date. 

If your total tax bill is over £1,000 and 80% of the total tax for the year was not collected via PAYE, then your payments on account deadline is 31st July.  

Deadlines can differ in certain scenarios like: 

• If you are eligible and want HMRC to automatically collect the tax you owe from your wages and pension (via your tax code), submit your online returns by 30th December. 
• A trustee of a registered pension scheme or a non-resident company must submit a paper tax return by 31 January. 

• Should your partnership’s accounting date fall between 1 February and 5 April and one of your partners is a limited company, the deadline for: online returns is 12 months from the accounting date while that of paper returns is 9 months from the accounting date. 

Bear in mind that failure to meet HMRC deadlines attracts penalties. 

Can I file self-assessment returns early? 

You don’t have to wait until January to file your returns, and there are some benefits to filing your tax return early.  

You stand to benefit in the following ways: 

Reduced errors 

Rushed tax returns are prone to errors. Filling early will help you recognise errors with time left to address them. 

Avoid inflated accountancy fees 

Fast-approaching deadlines attract premium rates from accountants. Why wait for the rush hour when you can pay lower fees by being early? 

Did you know Spondoo Accountants has a transparent payment policy on a fixed fees basis? Go through the Spondoo Accountants packages and their fixed price on self-assessment. 

Time to plan on your tax bills 

January 31st (the time when your tax bill is due) to October is enough time to structure your funds and set aside your liable tax. The earlier you submit, the sooner you’ll know how much you are due - and how to budget for it. 

You will have all the time you need for registration 

The self-assessment registration process can take a while, especially during peak times in January. If you register early, you will have all the time to keep all your records in order. You can also utilise faster response times from HMRC call centers because they will not be crowded with all taxpayers trying to submit their returns. To beat the lengthy ‘musical’ hold times, it is best to do everything early on. 

Having an early tax refund 

If you qualify for a tax refund, why wait longer to get what you are due? HMRC will process your refund faster and efficiently because less people are applying at this time. Tax refunds are a major boost to businesses’ cash flow. 

Avoid penalties. 

Missing deadlines for submission and payment of tax returns warrants penalties. For example, if your tax return is just 1 day late, you will have to pay a whooping £100 in late filing fees!! Overdue payments of more than three months attract more charges. You should also not forget that HMRC charges interest on past due payments.  

Although there are some changes to the penalties due to Coronavirus, here is more information on the various penalties: 

• Missing the January 31st deadline attracts an instant £100 fine. 
• Not filling self-assessment returns by 30th April earns £10-per-day fines (for up to 90 days)  
• For not filling after another 90 days, the fine rises to a £300 fine or 5% of the tax you owe. 
• Another £300 fine or 5% of the tax you owe if you still did not file within a year. 
• Should HMRC feel like you are purposefully delaying your filling, you are liable to additional penalties of up to 100% of the tax owed. 

Speak to a self-assessment expert 

If you would like assistance from a professional tax agent that can submit your return and deal with HMRC on your behalf, free feel to speak to our accountants for more information. 

Call us today at 02033 259 341 or contact us via mail.