What is HMRC Self-Assessment

762

Understanding HMRC self-assessment when you are self-employed is critical.

Misunderstand it, failing to meet its requirements and deadlines will result in automatic penalties and interest.

What is HMRC Self Assessment

The HMRC Self Assessment is a system put in place for people who have received untaxed income to declare it and pay any tax due.

What is Untaxed Income

If you are employed then your employer to works out your tax each time they pay you and pays it over to HMRC on your behalf.

But sometimes people receive income but no tax has been deducted from it. That includes things like:

  • Rental income;
  • Self-employment income;
  • Dividends;
  • Bank interest.

It the responsibility of the person who received untaxed income to let HMRC know about it, work out their tax bill and pay it over to HMRC.

This is done by sending HMRC a self-assessment tax return form.

What is a HMRC Self Assessment Tax Return Form

A self-assessment tax return form summarises all income earned during one tax year.

A tax year runs from 6 April to 5 April.

It’s made up of different sections which cover different types of income. People must fill in the sections that are relevant to their own situation.

For example if you’re:

  • Self-employed you complete the self-employment section;
  • A landlord you complete the Land and Property section.

Self-assessment tax return forms are due for filing by 31 January each year for the previous tax year, along with any tax payable and payments on account.

So your tax return for the tax year 2018/2019 is due for filing by 31 January 2020.

Making Tax Digital and HMRC Self-Assessment

Making Tax Digital is the entire digitization of UK bookkeeping and taxes, including the quarterly reporting of income and tax payments.

The first phase of making tax digital has commenced on 1 April 2019 but only affects VAT registered businesses.

The next phase will affect everyone else who uses HMRC self-assessment. It is due to start April 2020, but this is unconfirmed.

The new Quarterly reporting system will replace the annual self-assessment tax return form due by 31 January each year.

Can You Fill Out Your Own Self-Assessment Tax Return

You can choose to fill out your own HMRC self-assessment tax return and many people do, depending on how complicated their tax affairs are.

Alternatively, you can choose to hire an accountant or tax advisor to fill out your tax return for you.

Whichever route you choose ultimately it is your responsibility to make sure your tax return is filed on time.

Not sure whether you need to use an accountant? Then read this to help you decide.

Accountant In Your Inbox

I'll help you to make more profits, pay less tax and stay on the right side of the rules. Enter your email address and let's connect!

No spam ever. Unsubscribe at any time. Powered by ConvertKit