Who Needs to Complete a Tax Return in the UK?
17th December 2024
Many people in the UK don’t have to worry about filing a tax return because their tax is handled automatically through PAYE.
However, some individuals need to complete a Self Assessment tax return each year.
But who exactly needs to file a tax return, and why?
Let me give you the basics so you know if it applies to you.
A Self Assessment tax return is a way to report your income to HMRC if it’s not automatically taxed. While many people have tax deducted directly from their wages or pensions, others need to declare what they’ve earned so that HMRC can work out the right amount of tax.
Filing a tax return may sound complicated, but it’s essentially about making sure you pay the right tax based on your personal circumstances.
So, You must file a tax return if any of the following apply:
Self-Employed or a Sole Trader
If you’re self-employed or run your own business as a sole trader and have earned more than £1,000 (after expenses) in a tax year, you need to submit a tax return.
This is to declare your business income and calculate how much tax and National Insurance you owe.
If you’re a partner in a business partnership, you must file a tax return to report your share of the profits or losses.
If you have income that hasn't been taxed at source, you will need to declare it. This could include:
Rental income from property you let out.
Savings or investment income if you earn more than £10,000 from interest or dividends.
Foreign income, even if it was taxed abroad.
Earnings over £2,500 from tips, commissions, or other sources not taxed through PAYE.
If your income is over £100,000 a year, you must complete a tax return, even if all your income is taxed through PAYE. This is because your tax-free personal allowance may be reduced, affecting how much tax you need to pay.
If you or your partner earns over £60,000 and you receive Child Benefit, you may need to file a tax return due to the High Income Child Benefit Charge. This is a tax charge to repay some or all of the Child Benefit you received.
If you sold an asset, like property, shares, or valuable items and made a profit above the tax-free allowance, you’ll need to report this to HMRC by completing a tax return. This is called Capital Gains Tax.
If your only source of income is from wages or a pension that’s taxed through PAYE and you have no additional income or allowances to claim, you probably don’t need to complete a tax return. HMRC will handle your tax automatically.
However, it’s always good to double-check, especially if your circumstances change or you receive a notice from HMRC asking you to file a return.
If you’re a director of a company, you may need to file a tax return, especially if you take income through dividends or if you have income that isn’t taxed through PAYE.
If you earn over £10,000 from savings and investments (before tax), or more than the Dividend Allowance from shares, you will need to complete a tax return to pay any additional tax due.
If you want to claim tax relief on work-related expenses (like professional subscriptions or expenses above what your
employer reimbursed), donations to charity, or personal pension contributions, you may need to fill out a tax return.
If your only source of income is from wages or a pension that’s taxed through PAYE and you have no additional income or allowances to claim, you probably don’t need to complete a tax return. HMRC will handle your tax automatically.
However, it’s always good to double-check, especially if your circumstances change or you receive a notice from HMRC asking you to file a return.
When is the Tax Return Due?
A Paper Tax Return: Must be submitted by 31st October following the end of the tax year.
An Online Tax Return: Must be submitted by 31st January after the tax year ends. This is also the deadline to pay any tax you owe.
For example, for the 2024/25 tax year (which runs from 6th April 2024 to 5th April 2025), the online tax return and payment are due by 31st January 2026.
If you don’t file a tax return when you’re required to, or if you miss the deadline, you could face penalties and interest charges.
Hopefully, you can see that filing a tax return doesn’t have to be complicated. It’s about reporting your income honestly and paying the right tax. Make sure you know the rules that apply to you, stay organized, and you’ll avoid any headaches down the line.
And if it does all seem complicated, that’s where Accountants can help. They do all the hard work so you don’t have to.
Understanding Self Assessment Payments on Account and When They’re Due
13th December 2024
If you're self-employed, a landlord, or have other untaxed income, you've probably heard of Self Assessment. But did you know that you might also need to make something called "Payments on Account"? These payments can seem a bit confusing, so I’m going to try and break them down, step-by-step, to help you understand what they are, when they’re due, and how to stay on top of them.
What Are Payments on Account?
Payments on Account are advance payments towards your next year’s tax bill.
HMRC uses them to help spread the cost of your tax bill over the year, rather than having one big payment at the end. They’re usually required if you owe more than £1,000 in tax through Self Assessment, and they cover both income tax and Class 4 National Insurance for self-employed people.
What Are Payments on Account?
Payments on Account are advance payments towards your next year’s tax bill.
HMRC uses them to help spread the cost of your tax bill over the year, rather than having one big payment at the end. They’re usually required if you owe more than £1,000 in tax through Self Assessment, and they cover both income tax and Class 4 National Insurance for self-employed people.
How Do Payments on Account Work?
When you submit your Self Assessment tax return, HMRC looks at your tax bill for the year. If you owed more than £1,000 (and haven’t paid more than 80% of it through other means, like PAYE), they’ll ask you to make two advance payments for the next tax year. Each payment on account is 50% of the previous year’s tax bill.
Payments on Account are due in two instalments:
Your First Payment on Account is due by 31st January – This is the same deadline as your Self Assessment tax return.
Your Second Payment on Account is due by 31st July – Midway through the tax year.
Additionally, if there’s any tax still outstanding after these two payments, you might need to make a “balancing payment” by 31st January of the following year to settle any remaining amount.
For example:
If your tax bill for the 2022/23 tax year was £3,000, you would make two payments of £1,500 each: one by 31st January 2024, and the second by 31st July 2024.
If your income goes up or down, you can adjust your Payments on Account:
If your income is lower than last year, you can ask HMRC to reduce your Payments on Account. This could prevent you from paying more than you need.
If your income is higher, you might want to pay more to avoid a large balancing payment at the end of the year.
Just remember that if you reduce your payments too much and end up underpaying, you might have to pay interest on the shortfall.
You can pay your Payments on Account through several methods:
Bank Transfer – Directly from your bank account.
Debit or Credit Card – On the HMRC website.
Direct Debit – You can set this up to pay automatically.
Cheque – If you prefer, though it's slower.
Always use your Unique Taxpayer Reference/ UTR as a reference when making payments, so HMRC can track your payment correctly.
If you miss a payment deadline, HMRC may charge interest on what you owe from the due date until it’s paid. If the delay continues, additional penalties could apply, so it’s best to pay on time or contact HMRC if you’re having difficulties.