Wondering whether you need to complete a self-assessment tax return? In this guide, you’ll find out who needs to file a tax return and why they need to do so. I’ll also explain exactly what HMRC needs to know. Read on to find out more and answer all the questions you might have on this topic.
Updated 13 September 2021
Table of contents
1. Who Needs to Complete a Self Assessment Tax Return?
Self-assessment is a process created by HMRC. It allows anyone who receives untaxed income to declare it to the government and pay any tax due. To do this, you use a tax return form (or SA100).
For people in the UK who are employed by someone, their employer will take responsibility for working out their income tax and national insurance. They do this by deducting both of these and paying it to HMRC on their behalf. They get a payslip and don’t really ever have to deal with HMRC, unless there are changes to their tax codes. Others however, get paid money which is known as untaxed income and it is their responsibility to tell HMRC about it, work out how much tax you owe and pay any tax over after receiving the money. The way they do this is by registering for self-assessment and file a tax return.
Individuals who typically need to complete a tax return include individuals who are:
- Self-employed or a sole traders
- Earned a salary of £100k+
- Wanting to claim certain income tax reliefs or record a tax loss to use in the future
- Received interest that was untaxed or not taxed at source. For example, National Savings and Investment account (in general, interest paid by banks or building societies is paid after deducting tax. However, some bank interest may still need to appear on a tax return)
- Receiving dividends;
- Earning a gross salary of £50,000, have claimed child benefit and need to pay the high-income child benefit charge;
- Have savings or investment income of £10,000 or more;
- Have a capital gain to report such as from selling a second property;
- Completed one in the previous tax year and HMRC has assumed another should filed this tax year.
There are some types of income that are tax-free such as:
- Earnings below the personal allowance
- Your first £1,000 of self-employment income (trading allowance)
- The first £2,000 of dividend income (dividend allowance)
- Your first £1,000 of interest on savings
- Premium bonds or lottery winnings
- Income from a lodger under £7,500 (rent-a-room scheme)
If you are not registered to complete a self-assessment tax return, then you may not need to tell HMRC about this income. However, if you are registered for self-assessment, then you may need to include some of these types of income on your tax return. This is applicable even though you have no tax to pay. You’ll need to check what you need to do depending on the type of income you’ve received when you fill in your tax return.
2. Will HMRC Tell Me to Fill In a Tax Return?
No, It’s up to you to decide whether you should register for self-assessment and file a tax return. That’s because it is impossible for HMRC to know everyone’s financial affairs. Therefore, they place the trust in us to declare any untaxed income that we receive (and to work out whether we should be telling them or not). That doesn’t mean you can skip filing a return. The tax-man has ways and means of finding out if you should be filing a tax return when you haven’t done so.
3. How To Let HMRC Know You Need to Complete a Tax Return
If you already fill in a tax return for another reason, for example, because you are a landlord or have dividend income, then you don’t need to apply again. If you register for self assessment again, HMRC will set you up on their system for a second time and expect two tax returns from you! Instead, you should complete a CWF1 Form online.
If you are registering because you have become self-employed, then read this guide to registering as self-employed or if you are registering a partnership, then read this guide to to find out how to set up a partnership because the forms are slightly different.
3.1 How to Register to Complete a Self-Assessment Tax Return
How to Register to Do A Tax Return
- Visit the HMRC website
Head over to the HMRC website and choose the option to “Register Online”
- Set Up a Government Gateway Account
This is the account where you’ll manage all your taxes. HMRC will automatically generate a 12 digit number which you’ll need to use as your login and let you choose a password.
- Enrol for Self Assessment
Complete the HMRC form to register for self assessment. You’ll need to share your personal details, details about your reasons for registering to complete a tax return and make a declaration that everything you have entered is true.
- Wait for HMRC to Review Your Application
HMRC will review your application once you submit it. Within the next 10 days they will send you out a UTR number to be posted to you (can take up to 10 days). It’s a 10 digit 10 ID number that you’ll need to keep safe in the event you need to prove you are a sole trader, speak with HMRC and manage tax returns.
- Enter Your Activation Code
Finally, you’ll also be sent an activation code for your Government Gateway account as part of the verification process. It can take up to 28 days for this to be sent but make sure you enter it as soon as you receive it because it will expire.
- What Happens Next
Once registered with HMRC you’ll need to manage your own taxes which means declaring your income once a year on a tax return, by 31 January and paying any tax you owe once or twice a year depending on your circumstances.
4. How To Cancel a Self Assessment Tax Return
If you have received a request from HMRC to complete a tax return but feel you don’t meet the criteria to need to do so, call them on 0300 200 3310. You can discuss your situation and ask if they can withdraw the return.