Brief Guide to Self Assessment
The first Self Assessment forms were issued in 1997, intended as an easy-to-follow tax return that allows many taxpayers to calculate and pay their taxes themselves.
Eligibility
Most working people are taxed by PAYE and do not have to complete a Self Assessment tax return. However, you will probably need to do so if you earn money that is not taxed at source because you are:
- Self-employed
- An employee or pensioner with an annual income of £100,000 or more
- An employee or pensioner with an annual income from savings or investments of £10,000 or more
- An employee or pensioner with untaxed annual income of £2,500 or more
- A company director or trustee
- Someone who profits from rent or otherwise benefits from land or property in the UK
- A minister of any faith or denomination
- A Name or member of Lloyd’s
If in doubt over whether you are eligible for Self Assessment, contact your local branch of the Inland Revenue (http://www.inlandrevenue.gov.uk) quoting your National Insurance number and, if possible, your tax reference (which can sometimes be found on your pay slip).
Forms
At the beginning of every tax year in April, everyone who is eligible is sent the basic ten-page Self Assessment return (called an SA100), which covers such subjects as allowances and employment details.
You might also receive one or more supplementary forms, depending on your circumstances and income – for instance, if you earn money from share dividends. If you are not sent the necessary forms, you can ask for them to be posted to you, or you can download them from the Inland Revenue’s website.
You can also fill in your return online. This has the main advantage of immediately showing how much tax you owe (or are owed).
Deadlines
If you want the Inland Revenue to calculate your tax and National Insurance liabilities, you must return your paperwork by 30 September. If you prefer to make your own calculations or, more likely, have your accountant do it, then you have until 31 January to file your return.
Payment
Payment is expected by 31 January – the same deadline for your return – unless you are self-employed, when you must pay an instalment on account. This is calculated as half the previous year’s tax bill. A second, equal amount must then be sent to the Inland Revenue no later than 31 July. An additional balancing payment will then be demanded the following 31 January – or, if you are lucky, you will receive a rebate.
Penalties
If your tax return isn’t in by 1 February, you will incur a fine of £100. And you’ll have to pay another £100 if your return is still outstanding six months later. You’ll be forced to pay a 5% surcharge on any taxes that remain unpaid after 28 February, and a further 5% on taxes not paid after 31 July.
Paperwork
By law you must keep all business records for at least 22 months after the end of the tax year - five years and ten months if you are self-employed - and you can be fined as much as £3,000 if you fail to maintain or retain adequate records to back up a tax return.
About one in 20 self-assessment taxpayers will face an inquiry into their return by the Inland Revenue and will need to produce accurate paperwork.
Basic records if you are self-employed will include proof of all sales and purchases (invoices and receipts, for example), bank statements and details of amounts you personally pay into or take from your business. If you are an employee, you will need your P60 from your employer (or a P45 if you have left your job) and a P11D or P9D detailing benefits and expenses.
