Do I Need to Complete a Tax Return?

Whether you need to complete a tax return depends on the type of income you’ve received and how you received it.

Self-Assessment is the system HMRC uses to collect tax from individuals who have received untaxed income.

For many, they are employed so their tax is usually deducted by their employer before they get paid and then paid over to HMRC on their behalf. This is known as PAYE or pay as you earn.

For others, they earn different types of income which has no tax deducted so they need to declare this to HMRC, using a self-assessment tax return form, and then pay tax on it.

Who Needs to File a Tax Return

You’ll need to send a tax return by the 31 January, if in the previous tax year (6 April to 5 April) you’ve received untaxed income. For example, if you’re:

  • Self-employed or a sole trader
  • Wanting to claim certain income tax reliefs or record a tax loss to use in the future
  • A landlord
  • Employed and earning a gross salary of £100,000 or more
  • A Director of a Limited Company regardless of whether you own shares, take a salary/dividend or not;
  • 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.
  • Receive dividends;
  • You or your partner receive a gross salary of £50,000 and claim child benefit so 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;
  • You’ve completed one in the previous tax year and HMRC has assumed you should file one this year.

It’s up to you to decide whether you should to register for self-assessment and file a tax return. That’s because it is impossible to for HMRC to know everyone’s financial affairs so they place the trust in us to declare untaxed income.

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 but hasn’t done so!

What Kind of Income Is Not Taxed

Not all types of income need to be declared to HMRC and in these cases you can avoid filling in a tax return. For example, if you:

  • Receive income of less than £1,000 like from eBay, babysitting, rent – this is known as the £1,000 trading allowance)
  • Rent a room in your own home for less than £7,500 per tax year
  • Have less than £1,000 for basic rate taxpayers or £500 for higher rate taxpayers in savings – this is known as the personal savings allowance
  • Run a business classified by HMRC as hobby
  • Earned interest from ISAs and Premium Bonds are excluded from tax returns as they are tax-free.

How To Let HMRC Know You Don’t Need to Complete a 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 to discuss your situation and ask if they can withdraw the return.

What Next?

If you need to fill in a tax return and haven’t let HMRC know, then read this guide to help you get registered. Once you have done this you can read these resources to help you to complete your tax return online.

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.