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A Beginners Guide to HMRC Self Assessment

What is HMRC Self Assessment?

Self-assessment is the process created by HMRC that allows individuals to pay income tax and national insurance on any untaxed income they have received.

When you work for someone, your employer will take responsibility for working out how much tax and national insurance you owe, deducting it each time they pay you and giving you a payslip with a breakdown of your income and deductions. Your employer then sends any money they’ve deducted to HMRC on your behalf.

In other cases people find themselves receiving untaxed income. In other words, they get paid money that should pay tax on but haven’t. For example, if you’re self-employed, earn £100k+ or have sold a rental property and need to pay capital gains tax. Read this guide to find out what counts as taxable income.

It is your responsibility to let HMRC know that you have received untaxed income and the way you do this is to

  1. Register for self-assessment
  2. Get your UTR number from HMRC
  3. Fill in a tax return

Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.

What is a Self Assessment Tax Return?

A tax return is a form issued by HMRC. You’ll find it in your .GOV account once you’ve registered for HMRC self-assessment. Alternatively, in certain circumstances, you can fill in a paper version.

HMRC Self-Assessment

The tax return is made up of different sections. This first part is the main section which summarises personal information like your name and national insurance number and it establishes which types of income you have received such as:

Once you’ve completed the main section you’ll then need to fill in the supplementary sections relevant to you, depending on the income you’ve received. These are:

When to Register for Self Assessment

You need to register for self assessment by the 5th October following the end of the tax year you received income that you need to declare to HMRC.

A tax year runs from 6 April to 5 April each year. So if you received taxable income during 2022-23 tax year, you’ll need to register with HMRC by 5 October 2023.

When Is Your Tax Return Due?

One tax return relates to one tax year. So a tax return is due by 31 January, around 10 months after the end of the tax year.

That means tax returns for the 2021-22 tax year are due by 31 January 2023 to avoid late penalties and charges.

How is Your Self Assessment Tax Worked Out?

Your tax is automatically calculated online from the numbers you enter when you fill in your tax return. You’ll be presented with how much tax you need to pay across the different income tax brackets, along with a breakdown of how it is calculated before you submit your return so you can check for any mistakes.

Ways to Pay Your Self Assessment Tax Bill

You must pay your tax and National Insurance twice a year on 31st January (along with your tax return). Depending on how much you owe, you may also be required to pay an instalment towards your next tax bill, known as a payment on account. You can pay any tax you owe by;

  • Bank transfer
  • Direct Debit
  • Debit Card
  • Through your tax code if you’re employed

What Happens if You Can’t Pay Your Self Assessment Tax Bill?

HMRC takes non-payment seriously, automatically adding penalties and charges for failing to submit your return or make payment which escalates the longer you leave it.

In the event that you cannot pay your tax bill on time, you should contact HMRC either online or by phone to discuss your situation and arrange a payment plan.

Related: – small business website with easy-to-follow guides on topics like tax, accounting and business registration for the UK self-employed and Limited Company Directors. Follow on Instagram and Tiktok for more.