Self assessment
This section looks at who needs to
complete a self-assessment return, important dates for
self-assessment, payments on account and how they work together
with tax calculations and determinations.
You can read through this information sheet, or go directly to
the sections you want to read by clicking on these links:
Self-assessment
Do I need to complete a self-assessment return?
Self-assessment does not affect everyone. You will normally only
need to complete a form if you are:
- working for yourself (i.e. you are self-employed)
- a company director (except not-for-profit organisations)
- a minister of religion (any faith or denomination)
- a partner in a business
- a higher rate taxpayer (the highest rate of tax is currently
40%, but there will also be an additional rate of 50% from 2010/11)
although there are some exceptions to this
- a trustee or the executor of an estate.
You will also have to complete a self-assessment if you
have:
- Untaxed income, e.g. interest that is not taxed before it is
paid to you, such as National Savings products or rents. If you are
an employee and the income is less than £2,500 a year, a tax return
may not be necessary. However, if you receive other untaxed
interest and the tax due on it cannot be collected via your
Pay as You Earn (PAYE) coding notice, you will need a tax
return
- If you receive regular annual income from a trust or settlement
or income from the estate of a deceased person and further tax is
due on the income
- Taxable foreign income, whether or not you are resident in the
UK, and including non-resident landlords
- Savings and investment income of £10,000 or more before
tax
- Annual income of £100,000 or more before tax
- Tax due at the end of the year that cannot be collected via
your PAYE coding notice for that year
- Untaxed income of £2,500 or more. If you are a pensioner, you
may be able to pay your tax through your PAYE Coding Notice
- Claims for expenses of £2,500 or more
- Higher age allowance if you are 65 or over and your
allowance is reduced because of the level of your income – for
2010/11 your income will be over £22,900
- Capital Gains where:
- You have given away or sold assets worth £40,400 or over for
2010/11;
- - Or you have a capital loss, but your gains before losses are
more than the annual exemption for 2010/11 of £10,100
- - Or if you have no losses to claim but your gains are more
than the annual exemption for 2009/10 of £10,100
- Or you need to make any other Capital Gains Tax claim or
election for the year
- HM Revenue and Customs (HMRC) may also want you to
complete a return for other reasons or you may choose to complete
the form.
For more information on any of the above, see the HMRC
Self-assessment Guidelines (link opens in a new window).
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What records do I need to keep?
Basically you should keep anything you use to complete your tax
return. These may be relatively current documents, but if you have
a Capital Gain you may need to refer to older records as well.
You can keep your records on a computer, but if any tax has been
deducted from the income you will also need to keep the original
hard copy documents.
More information about some specific records you need to keep
(although there may be others) can be found on the HMRC website (link
opens in a new window).
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How long do I need to keep my records for?
If you are self-employed and carrying on a business, you need to
keep your records for five years from 31 January following the tax
year for which the tax return is made. So for example for the
2011/2012 tax return sent to you in April 2012 the following 31
January will be 31 January 2013 - you must keep your records until
31 January 2018.
If you are not self-employed but you need to complete a
self-assessment tax return, you will need to keep your records for
at least 22 months from the end of the tax year to which they
relate. For example, the records for your 2011/12 tax return issued
in April 2010 will need to be kept until at least 31 January
2014.
There are some situations when you may need to keep your records
longer:
If there is an enquiry into a tax return, you must keep all
records until the enquiry is closed. HM Revenue and Customs
(HMRC) have 12 months to tell you that they intend to start an
enquiry from when they receive the return. So for example, if your
2008/09 return was received by HMRC on 31 August 2010, they will
have until 31 August 2011 to enquire into the form.
If you sent back your return late so the HMRC enquiry window has
been extended, you must keep all your records until the latest date
for starting an enquiry has passed. HMRC can start an enquiry up to
a year after the quarter date following their receipt of your tax
return – the quarter dates are 31 January, 30 April, 31 July and 31
October.
For example, if you send in your 2011/2012 return to HMRC
on 31 March 2013, they will have one year after the end of the
quarter date ( i.e. one year after 30 April 2013) in which to
tell you they are starting an enquiry. You must therefore keep your
records until at least 30 April 2014.
Where you amend your tax return, HMRC can start an enquiry at
any time up to a year after the quarter date following their
receipt of your amendment. For example, if you amend
your 2011/2012 tax return on 1 September 2013, HMRC have until
31 October 2014 to enquire into the amendment. The normal dates
apply to the rest of the return.
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Self-assessment
Important dates for self assessment
Not all these dates will apply, as you may not need to make any
payments on account. We explain payments on account and how they
work here
31 January (during the tax year)
- The first payment on account for the tax year ending the
following 5 April is due.
- See 31 January (after end of tax year) regarding paying the
balance of tax for the previous year.
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April (following end of tax year)
- The tax year ends on 5 April. Shortly after this date anyone
who is required to file a tax return will either receive a paper
version of the tax return or, if you have previously filed online,
a notice requiring you to file a tax return for the year just
ended.
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31 July (following end of tax year)
- The second payment on account for the tax year ending the
previous 5 April is due.
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5 October (following end of tax year)
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31 October (following end of tax year)
- If you are sending in manually the paper version of your tax
return, this must be submitted by 31 October. If it is not received
by that date, an automatic penalty of £100 for late submission will
be charged for paper returns filed after 1 November. The penalty
however cannot be greater than the tax liability for the year in
question, so if you owed £50 tax for 2009/10, the penalty would be
£50.
- If you are filing your tax return online, then you still have
until 31 January to submit it. If you have manually submitted a
paper return after 31 October, do not then submit the return online
in the hope of avoiding the penalty charge, as HMRC will accept
only the first return.
- For example, Rashid sends in a paper 2011/2012
self-assessment tax return on 30 November 2010. He then gets access
to the internet through his work and decides mistakenly that if he
sends in his tax return online, he can cancel the paper one and
extend the deadline for submission to 31 January 2013. This is not
the case. HMRC will take the date you send in your return for any
year as the date they receive the first return whether it be a
paper one or online.
- If you want to guarantee that HMRC will be able to process your
return and advise you regarding the amount of tax payable on the
following 31 January, you need to have submitted the paper version
of your tax return by this date.
- Bear in mind that HMRC will always calculate your tax for you
whenever you send in your return, even if submitted late. However
if you send in the paper version of your tax return after 31
October, they cannot guarantee to tell you in time what your
payments of tax should be on the following 31 January. This could
then mean that you will be also liable for the maximum penalty of
£100 for submitting a late return.
- If you want to have your tax liability (where it is under
£2,000) collected through your code number you need to have
submitted your tax return by this date (but this is extended to 30
December if you file online). You can still request this treatment
of your tax liability up to the end of November, but there is no
firm guarantee that the HMRC will be able to include the tax in
your code.
- After the end of November they will not be able to collect the
tax this way where you file manually. Until now HMRC
have been able to collect underpayments through your PAYE code of
up to £2,000. This amount increased to £3,000 from 2012/2013.
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Penalties for late paper return filing
Any paper version of the return filed after 1 November will
attract a £100 penalty, i.e. HMRC continue to allow the extra day
before the penalty is charged.
The penalty can be appealed against on grounds of reasonable
excuse. However the excuse that using a computer is too difficult
because you are not computer literate is not acceptable as a
'reasonable excuse'. HMRC’s view is that if you have trouble using
a computer, you should get help.
The penalty cannot be cancelled by filing online another return
by 31 January – the first return legally satisfies the filing
obligation.
If you are able to calculate your tax liability and all the tax
owed is paid by 31 January then the penalty will be reduced to nil.
However note that the penalty is reduced not cancelled so if on
later enquiry tax becomes due for the year then the penalty will be
amended to the greater of the tax due or £100.
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30 December (following end of tax year)
If you are filing your return online, you need to submit it by
this date if you want HMRC to collect tax through your tax
code.
Self-assessment returns issued in April 2012, for income arising
in 2011/2012, will allow you to elect on that return to have unpaid
tax of up to £3,000 collected through your 2013/2014 tax codes.
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31 January (following end of tax year)
All tax returns filed online must be submitted by this date. If
after you have filed your tax return, you become aware that an
entry is incorrect, you can amend that return up to 12 months from
this date. If therefore you need to amend your 2011/12 tax return,
you have until 31 January 2014 to make the amendment. This applies
whether you filed manually a paper version of the return or
online.
An automatic penalty of £100 is charged if HMRC have not
received the return in time. Even if you have no tax to pay or you
have already paid all the tax you owe.
See
the example of Joanne (late submission penalty) (link opens in a
new window) on the LITRG website.
We will be going into more detail about payments on account but
many people will not need to pay anything on account and will
simply just pay the total tax due for the previous year on 31
January following.
See
the example of Kofi (no payments on account - balancing payment)
(link opens in a new window) on the LITRG website.
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What if I have problems filling in my tax return?
If you get a tax return, please do not worry if you have
concerns about filling it in. You can contact HM Revenue and
Customs (HMRC) for help.
You will normally receive your tax return in April each year
after the tax year finishes on 5 April. However there are some
circumstances when you might receive your tax return at other times
in the year and we have explained about this in more detail in the
section on
important dates for self-assessment.
To make it easier to make sure you have all the information you
need, it is a good idea to put any paperwork that comes in during
the tax year for your return in a file. It is then all to hand when
you come to fill in the form.
If you are manually filing a paper version of the tax return and
have missed the 31 October deadline, but think you have
a reasonable excuse, you can still file the paper version.
However you should send a covering note explaining why it is
late.
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What is a reasonable excuse for a late tax return?
The law allows people who have a reasonable
excuse to be excused a penalty for submitting their tax return
late.
There is a list of the excuses
that are considered reasonable and unreasonable (link opens in a
new window) on the HM Revenue and Customs (HMRC)
website.
It is important that you have told HMRC about any problems you
have as soon as possible.
Hopefully your case will never need to come to a tribunal
hearing because you will be able to give the necessary information
to HMRC, your excuse will be accepted and the penalty will be
dropped.
The following is a checklist that you can use to see if your
behaviour was reasonable:
- Did the event prevent you from sending in the tax return?
- Was the event unexpected and outside of your control?
- Did you send in your return as soon as possible
afterwards?
- Would the 'person next door' agree that the event prevented you
sending in the return on time?
If the answer to all these questions is yes, then appeal against
the penalty.
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Self-assessment
How do payments on account work?
While your employer or your bank or building society will take a
lot of the tax you may need to pay from you, you may find that you
have not paid sufficient for a particular year.
This extra tax will be due on 31 January in the year following
the tax year concerned.
See
the example of Robert 1 (working out payment amounts and dates)
(link opens in a new window) on the Low Incomes Tax Reform
Group (LITRG) website.
For the following tax year you will not need to make any
payments on account, if the amount of tax due for the previous year
was less than £1,000 or if more than 80% of the tax you pay is
covered by
Pay as You Earn (PAYE) or tax taken off before you get it by
banks, building societies or other sources, such as companies when
paying you dividends.
The limit has increased from £500 to £1,000 for self-assessment
payments on account (POA) from 2009/10 and later years. The
increased amount started on 6 April 2009 for income tax due for
2009/10. The first payments on account affected are those due in
January 2010 and July 2010.
See
the example of Robert 2 (need to make payment on account) (link
opens in a new window) on the LITRG website.
If the tax you were due to pay was more than the above amounts,
you will need to make payments on account for the current tax
year.
These payments on account are based on the total of your tax
bill for the previous year. You will pay half of that amount on 31
January in the tax year and half on 31 July following the tax
year.
On 31 January you also pay any balance of tax due for the
previous tax year, so remember you may have two amounts to pay.
See
the example of Robert 3 (payments on account) (link opens in a new
window) on the LITRG website.
Where the amount that you think will be due for the current tax
year has fallen, you can apply to reduce your payments on account
at any time before the 31 January deadline for that year's tax
return.
You can download a form SA303
(link opens in a new window) to claim the reduction from HM
Revenue and Customs' (HMRC’s) website or you can ask any tax office
to send you one.
You can also make the claim on the previous year's tax return
giving details of the circumstances in the additional information
box at the end of the form.
Please bear in mind that if you reduce your payments on account
below what they should in fact have been, you will have to pay
interest on the shortfall from the date each payment on account was
due. In some cases HMRC may charge a penalty if the reduction is
excessive.
You can see this in more detail in the examples of Robert 4
and Robert 5 below.
If HMRC makes an amendment to your return or you notify them of
an amendment that will increase the tax due, any extra tax will be
payable 30 days from the date of the amendment although interest
will run from the date that the tax should have been due.
See the example of
Robert 5 (over-reduction of payment on account - interest) (link
opens in a new window) on the LITRG website.
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The tax calculation
When you send your self-assessment tax return to HM Revenue and
Customs (HMRC) before 31 October, they will process the form and
send you a tax calculation.
The calculation sets out how they have worked out your tax and
also explains what payments on account are due for that tax year
and the current year. It is not a record of what tax you have paid;
just what tax is in fact due.
You should check the calculation and let HMRC know within 30
days of issue of any amendments that are necessary.
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The self-assessment statement
Every so often under self-assessment, HM Revenue and Customs
(HMRC) will send you a self-assessment statement (SA300) and these
forms tell you how much tax is due for payment and when, or how
much they need to repay to you if you have overpaid tax.
If you sent in your tax return before 31 October and HMRC did
not send you a self-assessment statement in time to make the
payment on account due on the following 31 January, they will only
charge interest from 30 days after they issued the
statement.
If your overall tax bill is less than £32, HMRC will not
normally send you a statement other than on an annual
basis.
There is a payslip attached to the bottom of the statement for
your use and instructions on how to make your payment. HMRC are
intending that payment by credit card will also be an option
shortly.
We explained in
Important dates for self-assessment that if you send in
your tax return late, a penalty of £100 will be charged and this
will be shown on the statement.
Where you have a balance of tax due on 31 January for the
previous tax year, you will be liable for a surcharge of 5% of the
amount still outstanding if this tax is not paid by 28 February in
that year.
This will be included on your self-assessment statement but HMRC
will also notify you separately of the charge. The surcharge is not
imposed on any payment on account also due on 31 January.
HMRC will also charge interest on late payment of tax and this
will be included on your statement as well.
A further 5% surcharge will be payable in respect of any tax due
on 31 January still unpaid by the following 31 July.
See the
example of Julia (late submission of tax return and surcharge)
(link opens in a new window) on the Low Incomes Tax Reform
Group's website.
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What is a determination?
If you do not send in your tax return by the
deadline on 31 January, so that it is not clear how much tax you
need to pay, HM Revenue and Customs (HMRC) may issue you with a
determination of tax. This is an estimate of your tax bill for the
year and you cannot appeal against the figure.
Any self-assessment statements you get will include the
determination of tax as a basis for your payments on account if you
need to make them.
The only way to get your tax reduced or amended to the correct
figure is to send in your tax return for the year.
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