A self assessment or personal tax return will most likely be required in the following circumstances:
- You are self-employed as a ‘sole trader’ and earned more than £1,000
- Your annual earnings from all sources are £100,000 or more
- You are a partner in a business partnership
- You are a director of a limited company
- You receive £2,500 or more from renting out property
- You have income of £10,000 or more from savings or investments
- Your income is £50,000 or more and you or your partner receive child benefit
- You have capital gains from the sale of assets such as property or shares
Further details about each of these circumstances are provided below. There are also other situations in which a self assessment may need to be completed but those listed above are the most common reasons that individuals are brought into the self assessment net.
If one of the above applied to you for the first time during the 2022-23 tax year (i.e., from 6 April 2022 to 5 April 2023) then you must notify HMRC of the need to complete a self assessment as soon as possible and by 5 October 2023 at the latest. This can be done on HMRC’s website here.
HMRC will then send you a tax return to complete which will be due by 31 January 2024, along with any tax liability. Any delays in registering for self assessment, completing the self assessment or paying the tax due could result in penalties and interest.
If you receive a request to complete a tax return for 2022-23 from HMRC and don’t believe that you need to complete one, it is important to notify them as soon as possible on 0300 200 3310 to avoid incurring penalties after the deadline passes on 31 January 2024.
If you are self-employed you must declare the income and expenses from your business on a tax return so that HMRC know how much tax and class 4 national insurance to collect from you. Any income tax and national insurance due must be paid by 31 January following the end of the tax year. HMRC will also require a ‘payment on account’ which is an estimate of the tax liability for the current tax year and is based on the most recent tax return. Payments on account are required to be paid twice a year on 31 January and 31 July.
Annual Earnings over £100,000
If your annual earnings from all sources of income exceed £100,000 then a self assessment must be completed. This is the case even if all of your income is taxed at source under the pay-as-you-earn (PAYE) scheme.
If you are a director of a limited company and receiving salary and/or dividends from the company, then you will most likely need to complete a self assessment on which that income is disclosed, along with any income earned from other sources.
Savings, Investment and Property Income
If the majority of your income is taxed at source under PAYE then you may be able to pay any additional tax due on income from savings, investments and/or property via your PAYE code rather than having to complete a self assessment. However, if the income from these sources exceeds the following thresholds then you must complete a self assessment:
- £10,000 or more from taxed savings or investments
- £2,500 or more from untaxed savings or investments
- £2,500 or more from renting out property
High Income Child Benefit Tax Charge
If you or your partner earn £50,000 or more and are in receipt of child benefit then the high income child benefit tax charge will apply to you. If you earn between £50,000 and £60,000 then a proportion of the child benefit charge received during the tax year will need to be repaid via a self assessment. If you earn £60,000 or more then all of the child benefit must be repaid.