Do you need to fill in a Self Assessment form?

Self assessmentAs an independent contractor or small business owner you’ll have 101 things to think about, particularly when it comes to fulfilling your tax and National Insurance (NI) obligations. From managing your business expenses to paying your own employees, it’s imperative you work with HMRC to ensure legal compliance at every stage of company growth. The Self Assessment process is another thing that you need to get your head around as a self-employed professional. However, there are some exceptions to the rule. Every self-employed professional may think they have to file a Self Assessment tax return, but it’s possible you may not need to.

In this blog post, we look at who does, and who doesn’t, have to submit a Self Assessment return and how professionals who don’t submit a Self Assessment settle their tax and make NI contributions.

Submitting a tax return – do I or don’t I?

Most UK taxpayers who are not taxed at source, via PAYE, must submit a Self Assessment tax return. This includes people with income from savings, investments or dividends from shares equating to £10,000 or more, as well as company directors. Employees with a second source of income, i.e. from self-employment, of more than £1,000 and those who are receiving more than £2,500 from renting out a property or another untaxed income source must also file a Self Assessment return. Even people who earned income from working or living abroad must pay tax via Self Assessment. There are many more circumstances where it’s necessary to pay tax through Self Assessment, but perhaps it’s worth considering who doesn’t need to file a tax return.

People who owe less than £3,000 in tax can choose to avoid the long and drawn out process of filling in and submitting a Self Assessment return. There are many reasons why your tax may fall below this level. Those just starting out or taking a more relaxed approach to their self-employed venture may not owe as much tax. Individuals taking time off from work for maternity/paternity or sick leave may also find their income dramatically reduced.

How do I settle my tax bill of less than £3,000?

If you owe less than £3,000 on your tax bill or you’ve already paid a proportion of your tax through PAYE, HMRC may be able to collect the small amount of tax you owe through your tax code. This means any tax you owe will be deducted directly from the salaries and pension you earn over a period of 12 months as equal instalments, just as an employee pays their tax. To be eligible for tax code deductions, however, you must still file a Self Assessment return, submitting your paper version by 31st October or your online tax return by 30th December. Find out more about your Self Assessment deadlines here.

Although your tax can be deducted through your tax code as a self-employed professional, any NI contributions that are still due from before 6th April 2015 must be settled through online payment, CHAPS, debit or credit card, or via your bank or building society. You can also pay by BACS, direct debit, or cheque.

I’ve earned more than I expected, what should I do?

The world of self-employment is fast paced and prone to fluctuation, meaning your circumstances could alter and your fortunes change quickly. Knowing what to do should your financial health improve is  important. Which? Money offers some great advice on the matter:

“If your circumstances change and you receive new income during the tax year (for example, you start letting property or sell a large number of shares), you must let your tax office know by 5 October following the end of the tax year. It will then decide whether you need to complete a tax return. If you used to send a tax return but don’t need to any more (for instance, if you’re no longer self-employed), contact HMRC to close your self-assessment account.”

Still unsure about whether you need to fill out a Self Assessment tax return? Use the government’s handy tool to check your status.