Self Assessment: understanding the basics

Updated on 21 December 2020

To help people understand the basics of Self Assessment – a way of paying tax by sending a tax return to HMRC each year – we have produced a downloadable factsheet explaining it.

Illustration of Self Assessment with various icons
(c) Shutterstock / Profit_Image

What is Self Assessment?

You tell HMRC about your taxable income and gains for a tax year by completing a Self Assessment tax return. Part of the process is to work out and pay what you owe.

This factsheet gives an idea of how it works. More detail can be found via our website – see at the end: Where can I find more information or get help?

When do I have to complete a Self Assessment tax return?

⚠️ You must fill in a tax return if HMRC have sent you a ‘notice to file’ asking you to do so. This is the case unless HMRC agree to cancel the return.

If you receive any untaxed income, you might need to complete a tax return.

Common situations are:

  • you are self-employed (unless this income is within the annual £1,000 trading allowance)
  • you are a partner in a business
  • you are a company director and have income on which tax is due that is not taxed under Pay As You Earn (PAYE)
  • you have property income – for example, you are renting out a room, a garage or a whole property to someone else (unless this income qualifies for rent-a-room relief or is within the annual £1,000 property allowance)
  • you want to claim tax relief on employment expenses over £2,500 in a year
  • you have to pay a tax charge on your child benefit, known as the ‘high income child benefit charge’
  • you have untaxed savings income. HMRC might be able to collect any tax due on small amounts without you doing a full tax return, but should always tell them about savings income of more than £1,000 a year (or £500 if you pay tax at the higher rate) and dividends of more than £2,000 a year
  • you have capital gains tax to pay which hasn’t already been paid in-year

This is not a complete list. See also Where can I find more information or get help?

GOV.UK has a tool which asks you questions and, based on your answers, tell you if you need to complete a tax return. You should keep a copy of your answers and the result it gives you.

Selling a property?

If you are a UK resident and sell a UK residential property and you have capital gains tax to pay after 5 April 2020, you have to tell HMRC and pay the tax within 30 days. Similar rules apply to non-residents selling any UK land or property, even if there is no tax to pay.

How do I register for Self Assessment?

You must usually register with HMRC for Self Assessment by 5 October following the end of the tax year in which the income or gains first arose, otherwise penalties may be applicable.

If you have reported a property disposal within 30 days, you may still need to register separately for Self Assessment.

See Where can I find more information or get help? for links to how to register online.

LITRG Self Assessment guide how to register by LITRG

When must I send my tax return to HM Revenue and Customs?

This depends on the date of issue of the notice that HMRC send you to tell you to complete a tax return and whether you complete your tax return on paper or online.

The table below summarises the position for 2019/20 returns (the tax year which ended on 5 April 2020).

If you owe less than £3,000 for the year and want HMRC to collect this by adjusting your PAYE code, you have to submit a paper return by 31 October or an online return by 30 December. So for 2019/20, this means submitting your online return by 30 December 2020 for the tax to be collected via your 2021/22 PAYE code.

If you do not submit your tax return by the due date, then you will automatically be charged a late filing penalty of £100. HMRC continue to charge penalties the longer you delay.

See What penalties can I be charged under Self Assessment? for more information.

Date of tax return
or data notice to
file issued
Deadline for
paper return
Deadline for
submitting return
to HMRC to
calculate tax
(paper returns only)
Deadline for
submitting return
On or before 31 July 2020 31 October 2020 31 October 2020 31 January 2021
1 August 2020 to 31 August 2020 3 months from date of notice 31 October 2020 31 January 2021
1 September 2020 to 31 October 2020 3 months from date of notice 2 months from date of notice 31 January 2021
After 31 October 2020 3 months from date of notice 2 months from date of notice 3 months from date of notice
LITRG Self Assessment tax return example by LITRG

What information do I need to complete my tax return?

Your tax return for any tax year must contain details of all that year’s taxable income and gains. Here are some typical things you might need:

✔️ Details of self-employment income and expenses, to work out your trading profit or loss for the year
✔️ Details of property income and expenses, to work out your rental profit or loss for the year
✔️ Employment and pensions income information, including forms P60, P11D and P45 from any jobs you have had
✔️ Interest certificates from banks or building societies
✔️ Details of pension contributions made to relief at source schemes
✔️ Details of any chargeable capital gains made in the year

You need to keep records of your taxable income and gains to be able to complete the tax return. You do not have to send original documents to HMRC, but if HMRC ask questions later, you might need them as back-up and to show you took reasonable care to get your return right.

For self-employed and property income, you need to be able to show how you have worked out your profit.

So, you need to keep things like:

  • invoices (bills) for work you have done
  • receipts for expenses paid
  • bank statements
  • statements from letting agents (or details of rental income for property if you do not use an agent)
  • information showing how you have taken account of any private use of things used in the business (for example, mileage logs for a vehicle used both in the business and privately).

If you are self-employed or rent out a property, you must keep records which support your tax return for five years after the normal 31 January deadline. If you are not self-employed and have no income from property, and you file on time, you need only keep records for 12 months after the same deadline, or otherwise 15 months if you file late.

You can keep your records on paper or digitally. But be aware that HMRC are planning to introduce a system in which you have to keep digital records for things like trading and property income. It is a good idea to start thinking about this now, so you are ready for it in future.

How do I work out my Self Assessment bill?

A key part of Self Assessment is calculating your own tax (and, if appropriate, National Insurance and student loan repayments) for the tax year and including this on the tax return. This does not have to be as daunting as it sounds.

It works slightly differently depending on how you send in your return.

But whether you do it online or on paper, look through the calculation yourself, as it can help you spot mistakes (made either by you, or sometimes by HMRC).

Online returns

HMRC’s system (or third-party software if you choose to use it) will calculate how much you owe.

Paper returns

HMRC will work out how much you owe based on the entries on the tax return and send you the tax calculation. Provided you submit the paper return by the due date (see above) then HMRC guarantee they will let you know what payment you need to make before it becomes due.

However, if you submit the return late, then although HMRC will still do the calculation for you, they cannot be sure this will be done in time for you to make the right payment by the due date.

Therefore, if you submit a paper tax return late, you run the risk of also making the Self Assessment payment late, for which penalties and interest may become payable. These are on top of penalties for late filing.

When do I pay the tax due and what payment options are there?

Usually Self Assessment payments (which can be made up of tax, National Insurance and student loan repayments) are due by 31 January following the end of the tax year to which they relate. So tax due for the 2019/20 tax year is due for payment by 31 January 2021.

Some taxpayers need to make instalment payments towards their annual Self Assessment bill for the following year.

These are called payments on account and generally speaking, if you come within the payment on account regime you will need to make payments on 31 July in each tax year as well as on 31 January.

It can be quite tricky to get to grips with payments on account, and if you are having trouble understanding your payments, we explain the rules in detail in our Payments on account factsheet.

If you are liable to payments on account, the typical payment cycle looks like this:

LITRG Self Assessment payment options by LITRG

⚠️ Note: Payments on account which were due on 31 July 2020 have been deferred as a result of the coronavirus pandemic and will instead be due on 31 January 2021 (at the same time as any balancing payment for the 2019/20 tax year and the first payment on account for 2020/21). However, if you are unable to pay your tax on time, it is possible to set up a payment plan with HMRC. See our page: What if I cannot pay my tax bill?.

For the latest, visit our Coronavirus guidance pages.

There are various ways to settle any payments due and these include cheque, bank transfer, debit card, but not personal credit card. See Pay your Self Assessment tax bill on GOV.UK.

Make sure you have the correct reference number when you make any payment so HMRC correctly allocate it to your account. This will be your 10-digit UTR (Unique Taxpayer Reference) number, usually followed by the letter K.

What penalties can I be charged under Self Assessment?

There are four categories of penalty which might be charged under the Self Assessment regime.

All these penalties can be appealed, for example if you have a reasonable excuse, special circumstances apply, or you took reasonable care to get your tax right. If you make an appeal, you must usually do so within 30 days of the date of the penalty notice. Interest will also be charged for late paid tax.

Type of penalty Automatic? Description
Late filing Yes Starting with £100 and increasing to £1,600 per year or more
Late payment Yes Calculated according the amount of unpaid tax at the due date
Failure to notify No Normally calculated according to the amount of tax unpaid as a result of the failure on 31 January following the tax year
Inaccuracy No Calculated as a percentage of unpaid tax as a result of the inaccuracy

What if I can’t pay the tax due?

If you are having difficulty meeting a tax bill or know that you will have difficulty paying a bill that becomes due in the near future, you should contact HMRC as soon as possible.

HMRC can allow you to spread payments over a period of months depending on your personal circumstances and what you can afford to pay.

If you agree with HMRC to spread your payment over a period of time and stick to it, you should not be charged late payment penalties.

Where can I find more information or get help?

There are several sources of general help if you get stuck with Self Assessment

HMRC video: understanding Self Assessment by LITRG

If you have a more specific query relevant to your personal circumstances, you will need to contact HMRC. You can do this via telephone or, if available, webchat. Visit the
Self Assessment: general enquiries page on GOV.UK.

If you call HMRC on their Self Assessment helpline (0300 200 3310, textphone 0300 200 3319) the adviser will either deal with your query or arrange for a call back from a specialist adviser. If you need more support to be able to complete the return then HMRC should refer you to their specialist team, the Extra Support Team, who are available to help those who are struggling to deal with their tax affairs in a variety of ways.

You may also be able to get assistance from voluntary sector organisations, such as the tax charities: TaxAid or Tax Help for Older People. More information can be found on our Getting Help page.

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