Do I Need to Complete a Self-Assessment?

The deadline to notify HMRC that you must complete a self-assessment tax return is quickly approaching, but it can be tough to know if you need to complete one. HMRC have criteria for who needs to submit a return. This varies depending on the income that you receive.

What is a Self-Assessment?

A self-assessment reports income to HMRC which has not yet been taxed. Unlike employment income, where Income Tax and National Insurance are deducted from a person’s wages, the tax on other types of income is not deducted when it is received. This means that the tax must be collected through a self-assessment.

Self-assessments are currently submitted per tax year. Each tax year covers the period 6th April to 5th April. This means that the current tax year is 6th April 2023 to 5th April 2024. A shift towards quarterly returns will be introduced when Making Tax Digital (MTD) comes into effect.

Who Needs to Complete a Self-Assessment?

HMRC have set criteria which determine who should submit a self-assessment. As there are many ways to earn an income, eligibility is based on the type of income you have received during the tax year. You can find the information which applies to you by clicking the bullet points below:

Sole Traders and Self-Employed Individuals

If you are self-employed or a sole trader, you must submit a self-assessment tax return if you earn over £1,000 in the tax year.

Please note that you must notify HMRC that you have become self-employed within 3 months. Failure to do so will result in a £100 fine.

Income from Property Rental

If you receive income from a renting out a property that you own, you must complete a self-assessment. This will include your rental income and allowable expenses for the tax year.

Allowable expenses are costs relating to the property that you have paid. These include repair costs, water rates, cleaner’s fees, and rental costs if you are sub-letting. Please be aware that any costs paid by the occupants cannot be included on your return

If you are earning between £1,000 and £2,500 a year, contact HMRC. They will advise you whether a tax return is needed.

Dividend Income

If you are a company director or shareholder who receives dividends, you must complete a tax return.

Dividend tax thresholds follow the same bands as Income Tax, with the rate increasing as your taxable income increases. Dividend tax calculations can be affected by the personal and dividend allowances.

Business Partnership Income

If you are part of a business partnership, you must include the share of income you have received on a self-assessment. This is separate from your partnership tax return, but both must be submitted. On your self-assessment this income will be declared on an additional page called SA104.

High Taxable Income

You must complete a tax return if your adjusted taxable income is more than £150,000.

Adjusted net income is your total taxable income before any personal allowances have been applied, less certain tax reliefs (such as Gift-Aid donations and trading losses).

Capital Gains

If you have sold an item at a profit, which can be classed as an asset, you may have to pay capital gains tax. This must be included on your self-assessment.

You will have to pay capital gains tax on personal possessions worth £6,000 or more (excluding cars), business assets, and certain types of shares.

Sale of property will class as a capital gain if is not your main home, if you have let out your main home, or if you have used part of your home exclusively for business. Property gains must be reported to HMRC, and the tax must be paid, within 60 days of the sale. The figures submitted must still be included on your self-assessment, but you will not be taxed further if you have paid the capital gains tax.

High Income Child Benefit Charge

You will need to submit a self-assessment if either you or your partner receive Child Benefit, but one of your adjusted net incomes is more than £50,000. This is because you will receive a tax charge known as the High Income Child Benefit Charge. If you both have incomes greater than £50,000, whoever earns more will pay the charge.

The threshold for this charge will increase from the 2024/25 tax year.

Income Received from Abroad

If you are a UK resident and receive foreign income this must be included on a self-assessment.

If this income has already been taxed in another country, you may be eligible for Foreign Tax Credit. This is dependent on the double-taxation agreement that the UK has with the other country.

UK-Based Income for Non-UK Residents

If you are not a UK resident, you will still need to submit a self-assessment if:

  • you receive rent from a UK property
  • you sell goods or services/run a business in the UK
  • you have a pension outside the UK but you were UK resident in one of the 5 previous tax years
  • you have other untaxed UK income

Your tax will be calculated automatically on the days you work in the UK if you are employed in this country but live elsewhere.

I Am Eligible for Self-Assessment – How Do I Notify HMRC?

If you meet the criteria to submit a self-assessment, but have not received a notification, you must notify HMRC before 5th October by registering for self-assessment online.

If you have received a notification letter, or a self-assessment form, from HMRC you must complete and submit a tax return. You will receive this if HMRC are aware that you need to submit a return.

I Want Help to Complete My Self-Assessment – Who Can I Ask?

Accountants can register you for self-assessment and submit tax returns on your behalf. Once you have engaged with an accountant, they can request the relevant information from you and prepare your self-assessment for submission. If you are interested in our services, please do not hesitate to contact us.

If you need further information on how to pay your self-assessment tax please use our blog resources.

 

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Tax on Ebay, Vinted and Airbnb Sales

From 1st January 2024, digital platforms such as Ebay, Vinted and Airbnb will be required to collect and report information on their sellers’ income. This has raised concerns with users of these online marketplaces, but how much will they be affected?

What do the New Rules Mean?

Digital platforms will now need to provide breakdowns of sales made on their sites by sellers of goods and services by the end of January 2025. HMRC hopes that this system will allow information to be exchanged more quickly and efficiently. It will be as available as tax information of traditional businesses, making the tax system fairer.

It has been ruled that the digital platforms must provide a copy of the information given to the seller. This will help users to evaluate if they will need to pay tax. It also allows for transparency with what is being shared.

Examples of platforms which will be impacted include Ebay, Vinted, Depop, Etsy, Amazon, Airbnb, Uber, Deliveroo, and Fiverr.

What Information Will Digital Platforms Share?

Digital platforms will be required to provide the following information to HMRC:

  • The seller’s name.
  • The seller’s address.
  • The seller’s National Insurance number.
  • Income earned during the year.
  • Any fees incurred on the platform during the year.

If the income relates to property lets (i.e., Airbnb listings), the addresses of these properties will also be provided.

It is possible that digital platforms will increase their fees to cover the admin cost of providing this information, however this has not been confirmed.

Do I Need to Pay Tax on my Online Income?

You will only need to pay tax on your online income if you are trading or making capital gain.

To be classed as trading you must be producing or purchasing goods for resale with the intention of making a profit. If you are selling items from around the house that you already owned it is unlikely that you will be required to pay tax.

If you are trading, but your income from the digital platform was less than £1,000 (before expenses) you are not required to inform HMRC. This is because it will be covered by the Trading and Miscellaneous Income Allowance. The allowance is available to all sole traders.

Examples

Vinted, Ebay, or Depop income you receive after selling clothes from your own wardrobe that you no longer wear is not trading; you would not be taxed. However, selling clothes you have purchased purely to resell for profit through these digital platforms is trading, and would be classed as taxable income.

If you were to sew the clothes yourself and sold them through Etsy or Amazon, this would also be classed as taxable income.

You can find more information about self-assessment tax returns here. Unsure of how to pay your self-assessment bill? Please find more information here on the topic. And, if you have any further questions regarding these changes or tax returns, do not hesitate to contact us.

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Self-Assessment – How to Pay

With the deadline for Self-Assessment approaching, it’s important to know both how to make your payments, and when to pay them.

What is Self-Assessment?

The self-assessment allows HMRC to collect income tax. Untaxed income must be included on a self-assessment. It will cover a tax year. Tax years run from 6th April to 5th April in the following year.

Who Needs to Complete a Self-Assessment?

You will need to complete a self-assessment if you have income that needs to be taxed. Examples of individuals who need to submit a tax return include:

  • Those with untaxed income.
  • Sole traders who have earned more than £1,000 during the tax year.
  • Directors who have drawn dividends during the tax year.
  • Those receiving income from rental properties.
  • Those with a taxable income of over £150,000.
  • Those who must pay the High Income Child Benefit Charge.

If you are unsure whether you will need to submit a tax return, you can check here.

What are the Self-Assessment Deadlines?

It is important that your self-assessment is submitted on time to avoid penalties. The deadlines are as follows:

  • Notifying HMRC that you need to submit a tax return – 5th October.
  • Paper tax return submissions – 31st October.
  • • Online tax return submissions – 31st January.
  • Payment Deadline – 31st January.

Each of these deadlines relate to the following tax year. For example, if you started renting a property in May 2023, you would need to submit a 2023-24 self-assessment. You would need to notify HMRC of this by 5th October 2024. If you were to submit a paper return for this period you must do so before 31st October 2024, or 31st January 2025 if it was submitted online. Your tax return payment must be made by 31st January 2025.

How Do I Pay my Self-Assessment Tax Bill?

There are a variety of methods which can be used to pay HMRC. These include Direct Debit, Faster Payments, CHAPS, and by Cheque. HMRC provide a breakdown of how each payment method works, and what information you will need to make them. You can find this information here.

When paying your tax bill, you should include a specific payment reference. This will be your 10-digit Unique Taxpayer Reference (UTR), followed by the letter “K”. If the wrong reference number is used it can lead to payment delays. You can find your UTR number on your HMRC online account or letters you receive from HMRC.

Paying via Tax Code

If eligible, you can pay your self-assessment tax code using your PAYE tax code. This means that the tax you owe will be automatically collected from your salary like your usual tax deductions. This can only be done if you meet the following criteria:

  • Your total tax bill is less than £3,000.
  • You already pay tax through PAYE.
  • Your self-assessment was submitted before 31st October by post/30th December online.

You can’t pay using your tax code if your taxable income does not meet the PAYE threshold, if you would be paying more than 50% of your taxable income in tax, or you would be paying more than twice your usual tax deduction.

If you meet all the criteria, HMRC will automatically collect the tax through your tax code unless specified on your tax return.

Budget Payment Plan

A Budget Payment Plan can be set up with HMRC to make payments towards the tax bill throughout the year. You can choose how much you pay and how often (e.g. weekly or monthly). The amount paid through the plan will be deducted from your next tax bill. If the payments do not cover the bill in full, you will pay the remainder by the deadline on 31st January. If you have overpaid, you can request a refund.

You can only set up a Budget Payment Plan if your self-assessment payments are up to date. You can check whether you are eligible here.

What are Payments on Account?

Payments on account are advance payments which are made towards your tax bill. You will make two payments a year, each being half of the tax bill from the previous year’s tax return. These payments are due by midnight on 31st January and 31st July. If, at the year end, your tax bill is greater than the sum of the payments made, you must pay the difference by 31st January the following year. This is known as the balancing payment.

For example, if your tax bill for the 2023-24 tax year was £2,500, and the sum of the payments on account came to £2,000 in 2024, the payment you would make on 31st January 2025 would be £1,750. This is made up of:

  • £500 for the balancing payment for the 2023-24 tax year.
  • £1,250 for the first payment on account for the 2024-25 tax year.

Please note that Payments on Account do not include capital gains or student loan payments. These will always be included as a balancing payment.

If you know that your tax bill will be less than in the previous year (i.e. you are now renting out one property rather than two), you can apply to reduce your payments on account. This can be done online via the Government Gateway or by post. You can find more information about this here.

What Penalties can be Issued for Self-Assessments?

The penalties HMRC can issue for self-assessments fall into two categories: late filing and late payment. Both types of penalty can be incurred at the same time.

A late filing penalty of £100 will be charged if the submission is 1 day late. Further penalties will be applied after:

Period Penalty Applied
3 months £10 per day, for a maximum of 90 days
6 months The greater of 5% of the tax owed or £300
12 months The greater of 5% of the tax owed or £300

For late payments, the penalties will be applied after:

Period Penalty Applied
30 days 5% of the tax owed
6 months Further 5% of the tax owed
12 months Further 5% of the tax owed

If you receive a penalty which you disagree with you can appeal this with HMRC. Appeals must be made within 30 days of the penalty notice date and can be filed either online using a Government Gateway account or by post using an SA370 form. You can find more information about both methods here.

What Happens if I Over/Underpay?

No matter which payment method you use, if you overpay your tax bill, you will receive a refund from HMRC. If you have underpaid, interest will be charged. You will be able to track if your payments have been received on your HMRC online account.

 

If you have any further questions about paying your Self-Assessment tax bill, please contact us.

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