How does self-assessment work?

In this section we just cover the basics of what self-assessment is and whether you are likely to need to complete a tax return.

If you want more detailed information on self-assessment - you can find that in the low income workers part of the website or use this link to go to the beginning of the extra sections on how self-assessment works.

In this short section we look at:

What is self-assessment and will I come under the system?

What do I do if I no longer need to complete an SA return?

What if I have not completed a return previously?

What is a Short Tax Return?

What is self-assessment and will I come under the system?

• The idea of self-assessment is that you are responsible for completing a tax return if you need to, and for paying any tax due for that tax year.
• If you want more detailed information on self-assessment - you can find that in the low income workers part of the website or use this link to go to the beginning of the extra sections on how self-assessment works.
• You will normally only need to complete a form if you:
  • Are working for yourself - you are self employed
  • Are a company director (except not for profit organisations)
  • Are a minister of religion (any faith or denomination)
  • Are a partner in a business
  • Are a higher rate taxpayer (the highest rate of tax is currently 50% for incomes (after allowances and deductions) over £150,000) and 40% for incomes over £35,000 although there are some exceptions to this
  • Are a trustee or the executor of an estate

• Untaxed income e.g. interest that is not taxed before it is paid to you e.g. Most 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 but if you receive other untaxed interest and the tax due on it cannot be collected via your 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 but if you are a pensioner you may be able to pay your tax through your PAYE Coding Notice. HMRC guidelines have been revised and now if you are a pensioner and the extra tax due can be collected from your PAYE source (e.g. occupational pension) then a return will not be required. A simple one-page form the P810 would need to be completed.
• Claims for expenses of £2,500 or more
• Higher age allowance as you are over 65 and your allowance is reduced because of the level of your income - for 2011/12 your income will be over £24,000. Where your only income is from retirement pension and one PAYE source only (and likely to remain so) and you do not make other claims to relief e.g. for charitable payments made, HMRC say it may be possible to deal with your tax affairs without the need for a Tax Return.
• Capital gains where:
  • You have given away or sold assets worth £42,400 for 2011/12;
  • Or you have a capital loss but your gains net of any losses are more than the annual exemption for 2011/12 of £10,600;
  • Or if you have no losses to claim but your gains are more than the annual exemption for 2011/12 of £10,600;
  • Or you need to make any other capital gains tax claim or election for the year
• 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 please have a look at the HMRC SA Guidelines.

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What do I do if I no longer need to complete an SA return?

• If your circumstances have changed and you think you no longer need to complete a tax return let HMRC know as soon as possible.
• If you have already received a tax return for a year, they may ask you to complete this and to tell them about the change in your circumstances in the Additional Information boxes.
• If you have not yet received a return for the year, please write to HMRC and let them know why you think you no longer need to complete a self-assessment return.
• If you are no longer in self assessment - it may be that you will need to claim a repayment of tax each year. If you think this applies to you, you should ask your local tax office for a form R40 to complete or you can download the form here.

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What if I have not completed a return previously?

• If you have not received a tax return but you had income on this list you will need to notify HMRC by 5 October following the end of the tax year.
• They will then send you a tax return to complete. If you do receive a return you have 2 months from the date of issue to complete and submit the form if you want HMRC to calculate your tax.

• Anyone who required to file a self-assessment tax return will have:
  • until 31 October to do so, if they choose to send a paper Return;
  • or until the following 31 January if they file online.

• This allows an additional three months for online filing compared with paper.

• You need to bear in mind that HMRC take the date of the first return received by them and this also triggers any late filing penalty. So if, for example, a paper 2010/11 return is filed after 31 October 2011, it is not then possible to avoid a late filing penalty by filing the return online.
• In addition, in certain other cases, HMRC will allow extra time beyond the statutory deadline of 31 October – until 31 January – for paper filing without incurring a penalty. These include taxpayers for whom facilities to file online are not yet available.
• In the event that there are problems with HMRC systems close to the filing deadline, taxpayers will not be penalised for late submission of a Return due to such problems provided that they file within a reasonable period once the service is restored.
• If you are asked to submit a self-assessment tax return after 31 July - the return must be submitted during the period of three months beginning with the date of the notice (for paper returns) or on or before 31 January (for online returns).
• If you are asked to submit a self-assessment tax return after 31 October - the return (whether paper return or electronic) must be submitted within three months from the date of the notice.

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What is a Short tax return?

• If you receive self assessment returns but have simple tax affairs - for example, as a pensioner if you are in receipt of state retirement pension, an occupational pension or a retirement annuity and you have straightforward investment income, or a reasonably small amount of income from property - you may be able to receive the Short tax return instead of the full self assessment tax return.
• The short tax return is four pages long and so is around one-third the size of an average self assessment tax return with supplementary pages. The guidance is also much shorter and simpler. There is no need to calculate the tax on the form but there is a two page simple calculation to give you a rough idea of your tax liability.
• Filing dates are the same as for the full self assessment return.
• The short tax return will be issued automatically based on the information in the previous year's return. However, you will need to tell HMRC if your circumstances change. There is a list of who will be able to use the Short tax return at the front of the guide notes so that you can see if you still qualify.

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