Self-assessment tax returns occur once a year and are known to cause a lot of aggravation amongst business owners, entrepreneurs and the self-employed. Below will tell you all about self-assessment tax returns and whether or not you need to file one.
Self-assessment tax returns exist to make sure that individuals report their annual earnings and their sources to HMRC. In turn, this allows HMRC to be able to calculate how much tax you are liable to pay in the applicable tax year. It is the individual’s responsibility so you must understand if, how and when to file the paperwork.
Who must complete a tax return?
In the UK, a tax deduction system known as PAYE is used if you are an employee of a company. This type of system allows your employer to deduct a percentage of your wage depending on your tax code. If this method is used, it is not required of you to fill in a self-assessment unless you have a second income, such as running a personal business on the side.
Self-assessment tax returns are frequently used by self-employed people, freelance contractors, small business owners and entrepreneurs being the main culprits. Furthermore, if you live in the UK but are developing money from abroad, additionally if you live abroad but are generating money from the UK tax must be paid. If you want to be entirely sure this applies to you, you can check online on the government website.
You should provide the following information to the best of your ability:
- National insurance and employee reference number
- P60 forms
- P11D forms
- A review of any personal profit or investments
- Capital gain summaries
- A list of taxable benefits received via your employer or the government
You must remember to meet the deadlines as you could face paying severe penalties. These are:
Day 1- £100
Upto 3 months- £10 a day, with a maximum of £900
Upto 6 months- £300 or 5% of the tax due, whichever is the higher amount.
If you are a UK resident submitting a self-employed self-assessment, it can be deferred by either post or online. However, if you are a non-resident, you cannot submit online it has to be by post, or you can get an accountant to do this on your behalf.