Self Assessment is a system HMRC uses to collect Income Tax.
For individuals, tax is usually deducted automatically from wages and pensions. However, individuals and businesses with other income (property income, dividends, sole trade, or partnership profits, for example) must report it in a tax return.
What is a tax year?
The tax year runs to 5th April, every year. Once past 5th April, individuals and businesses with other income are required to prepare and file a tax return with HMRC, a process known as ‘Self-Assessment’.
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Tax years span 2 calendar years and are usually referred to by reference to the calendar years which they span. So, the tax year ended 5th April 2024 would also be referred to as ‘2023/2024’.
What are the deadlines for Self Assessment?
The deadline for filing a self-assessment tax return, and paying the taxes, is 31 January following the end of the tax year in question.
What are Payments On Account for Self Assessment?
Individuals with higher income tax liabilities may be subject to payments on account in relation to settling their income tax liabilities. Usually, this applies to individuals with a tax liability of over £1,000 but can also apply in other circumstances.
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Payments on account are advance payments you make twice a year towards your Self-Assessment tax bill. HMRC estimate how much tax you owe for the upcoming year based on your previous year’s tax bill. The amount you must pay for each payment on account is half of your previous year's tax bill. These payments are usually due by midnight on the 31st of January and the 31st of July every year.
How can I reduce my payments for Self Assessment?
Individuals can apply to reduce their payments on account if they believe their income for the following tax year will be less, which can help with cashflow by not over-paying at the beginning of the year. This would be useful in circumstances where a dramatic change to the individual’s income has taken place, for example if a sole trader ceases trading and therefore will have substantially less income in the following tax year.
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One of the best ways to ensure you don’t overpay your income tax and reduce the time you spend waiting for refunds from HMRC, is to take action as soon as possible after then end of the tax year. By utilising the window of time between 6th April and 31st July, a taxpayer can file their tax return and reduce the payment on account which falls due on 31st July, or at least ensure it’s as accurate as possible in reference to their actual income, rather than an estimate based on the prior year’s income. This could save hundreds of pounds and we’ve found this approach to be highly valued by our clients as we’re able to add value from a cash flow perspective.
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Our experts are on hand to calculate and file your tax returns within this vital window, so if you’d like to take control of your payments, gain clarity on what you’re paying to HMRC and allow for better cash flow planning, then let us help you by getting in touch today.
For more ideas on reducing your tax liabilities, see our article here: Helpful ways to reduce your tax bill
Frequently Asked Questions:
Q. Do I need to complete a Self Assessment tax return?
A. If you have untaxed income of £1,000 or more for any given tax year, you will likely need to register for Self Assessment and file a tax return with HMRC.
Q. I've not had to file a Self Assessment tax return in the past, what do I need to do?
A. The first step is to register for Self Assessment and gain a Unique Taxpayer Reference (UTR) from HMRC which is used to form your tax record. From there, you need to wait until the tax year has ended before looking to prepare a tax return to be filed with HMRC.
Q. Can I file my own tax return?
A. As a taxpayer, it is your responsibility to register for Self Assessment and file a tax return with HMRC. This is something you can do online by visiting the Gov.UK webpage. It's usually a good idea to contact an accountant or tax adviser to help you register and fill out your tax return, to ensure it's done accurately.
If you’re unsure on how Self-Assessment might impact you or your business, please get in touch and we’d be happy to help with any queries.
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