Here, you can find out how self-assessment works if you’re earning more than £100k. It also includes whether you need to fill in a tax return and the impact on your personal allowance when your income exceeds £100k.
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.
How Self Assessment Works If You Earn Over £100K
HMRC requires anyone who earns over £100k during one tax year to fill in a SA100 tax return form. HMRC want to check that people earning over £100k are repaying their personal allowance – known as the personal allowance restriction.
What is the Personal Allowance?
The personal allowance is the amount a UK taxpayer can earn tax-free every tax year. For 2022-23 the personal allowance is £12,570, although some are entitled to more if they claim the marriage allowance or blind person allowance
What is the Personal Allowance Restriction
The personal allowance restriction affects UK individuals who earn over £100k during one tax year. It means that the personal allowance a UK individual is entitled to be restricted by £1 for every £2 of taxable income over £100,000. So, once income reaches £125,140 all personal allowance is lost.
How Tax Codes Work When You Earn Over £100k
If you are employed by someone, then you’ll receive a payslip with income tax and National Insurance deducted on your behalf under the rules of PAYE.
Your employer will know how much to deduct because they have your tax code. And every time they pay you, they report your earnings to HMRC using what’s known as RTI submissions.
That means HMRC will know from your employer’s reports that you are earning over £100k through your employment. HMRC will most likely get in touch with you (by letter) to notify you that you need to fill in a tax return.
Tax Returns if You Earn Over £100k
If you earn over £100k and need to fill in a tax return, you’ll need to start by registering for self-assessment on the .GOV website. Once you’ve successfully registered, you’ll get a UTR number from HMRC. From that point, you’ll be able to access the tax return form in your online account.
A tax return contains lots of different sections and boxes that you need to fill in to declare your employment income. Once completed, HMRC will then re-calculate how much tax you need to pay. If your employer has deducted everything correctly you’ll have no tax to pay.
You need to fill in your tax return by the 31 January each year summarising all your earnings for the previous tax year. So a tax return due by 31 January 2023 would contain all your income between 6 April 2021 to 5 April 2022.
You’ll need to enter your salary in the employment section and complete any other sections relevant to you if you receive any other types of income such as rent, bank interest or dividends. Additional income tax may be payable on any untaxed income you’ve received.
If you are employed and pay for costs as part of your work that is not reimbursed by your employer, then you may be able to enter these in the employment section of your tax return and claim a tax refund on employment expenses. Common expenses include work mileage, professional fees and subscriptions as well as working from home.
Self Assessment for Self-Employed Earning Over £100k
If you are self-employed and earning over £100k or other types of taxable income, then you’ll need to fill in a tax return to declare your income to HMRC and pay tax on it. It is your responsibility to let HMRC know you have untaxed income to declare by registering as self-employed.
When you fill in your tax return online, HMRC will automatically calculate how much tax you owe. They’ll also make any adjustments for the personal allowance restriction on your behalf.
Pension Contributions If You’re Earning Over £100k
Income tax allowances and reliefs help to reduce the amount of income tax you need to pay. But additionally for some, contributing up to £40,000 during the tax year into your private pension plan can reduce their taxable income. Consequently, this will bring their income below the personal allowance restriction.
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