The Ultimate Guide to Self-Assessment Tax Returns
TAX. That three letter word can strike fear into self-employed professionals, landlords, tradespeople, and entrepreneurs all across the country. With so many rules and regulations to navigate, and jargon to translate, it can often feel a bit like a minefield! But don’t worry, APARI is here to help.
If you find yourself confused by self-assessment tax returns, struggling to understand what you need to pay and when, or bewildered by how you actually need to fill in a tax return, then this page is for you.
Throughout this page we are going to blow the world of self-assessment tax returns wide open and break it down in an easy to understand way.
Part 1: Self-Assessment Tax Returns: The Basics
Before we dive into the nitty gritty of self-assessment tax returns, let’s cover some of the basic questions and worries that often come up when discussing tax.
What is a Self-Assessment Tax Return?
If you are new to the world of self-employment, owning buy to let property, or getting extra income on top of your normal wage, then you may be wondering what a self-assessment tax return actually is. The first thing to say is congratulations - these are exciting times as you start your new adventure!
Secondly, don’t fret over self-assessment tax returns… they really aren't as scary as people make them sound!
When you are employed by a company or organisation, income tax is usually removed automatically by HMRC before it makes its way to your bank account. This is often referred to as PAYE (Pay As You Earn). Approximately 85% of the total Income Tax is collected in this way.
When you are self-employed or a landlord, tax isn’t automatically taken out of your income. This is where self-assessment tax returns come in. Self-assessment is a way of telling the Government how much you earned so that your income can be taxed appropriately.
The reason it is called “self-assessment” is that it is your individual responsibility to confirm that the information is correct (even if you use an accountant!).
The full tax return itself can seem complex, but that’s a bit deceptive. Most people only need complete part of the return. Once you know what you’re doing - and you use software like APARI that designs out the complicated bits - it will become a lot simpler.
How is Making Tax Digital affecting Self-Assessment Tax Returns?
If you are new to the world of self-assessment tax returns, then you have joined at an interesting time. You may have already seen the phrase Making Tax Digital when researching self assessment tax returns online.
So, what is Making Tax Digital, and how does it affect your tax return? Well, there are both long and short answers to that question.
For the long answer, you can visit our page specifically dedicated to Making Tax Digital and exploring the concept of what it is about.
The short answer is that Making Tax Digital is the new way to file your self assessment tax return. The need to self assess your taxes will not change, but there will be three big changes when Making Tax Digital comes into full force;
The self-employed and landlords must submit tax returns through Making Tax Digital software.
Digital records of your business income and expenditure will need to be kept in suitable MTD software.
Self-assessment tax submissions will need to be made once a quarter, with a separate finalisation submission at the end of the tax year.
Submitting tax returns every quarter may sound daunting, and more work than the old self-assessment tax return route. However, HMRC recognised software (like APARI) makes it simpler. More on this later.
Who needs to fill out a Self-Assessment Tax Return?
So, if you are reading this and you only get income from an employer, then the odds are you will not need to submit a self-assessment tax return to HMRC.
That being said, if you have started out on your own or have an additional source of income (e.g. you're a landlord) then you will need to fill one out.
You need to file a self-assessment tax return when:
You are self-employed as a sole trader and have earned more than £1,000
You are a landlord and get money from renting out a property
You are a partner in a business partnership
You have a job where you receive large amounts of tips or commission
You receive money from investments, income from savings, or from dividends
You receive income from trusts, settlements, and estates
You are a trustee
You receive income from a foreign source on which UK tax is due
You are a company director with income that is not covered under PAYE
You are a non-resident but have taxable income from the UK
Alternatively, there are a couple of situations where you may choose to complete a self-assessment tax return, such as proving self-employment or to help claim some forms of Income Tax Relief.
For those unsure, there is a great HMRC tool for finding out if you need to submit a self-assessment tax return. You can find that tool here.
Part 2: Registering and Filling out Your Self-Assessment Tax Return
Okay, so now that you know what a self-assessment tax return is, and whether you need to submit a self-assessment tax return, the next step is how to physically submit the return itself. In this section we are going to look at what you need to do in order to submit your return.
Firstly, can you use software to complete your Tax Return?
Oh yes! In 90% of cases it is possible to use software for completing your self-assessment and submitting it online, making it much easier and making tax far more doable. HMRC recognised software, like the APARI software we offer, is designed around making submitting tax returns a lot easier. If you are a sole trader, tradesperson, or landlord then it should be easy to submit your tax return via software.
There are, however, a couple of things that software can’t yet do. Namely, you can’t register through software and you can’t pay through the software. Registering for a self-assessment tax return, and paying your final tax bill, must be done directly through HMRC.
What Software should I use to file my tax return?
There are plenty of options available on the market. While we don’t want to list them all here, we can provide you with some key points you should focus on when deciding of which software to use:
Use a HMRC recognised software
Use a secure software
Use a simple to use software (otherwise you can just do it all yourself)
Below you can see how simple to use our Simple Self-Assessment software is.
How do you register for a Tax Return?
Registering for a self-assessment tax return is fairly simple. All you need to do is register via the HMRC website in order to create an account. To create an account there are a few pieces of information you will need to hand, including:
Your contact details
Your National Insurance number
Once you’ve created an account, you should receive a Unique Taxpayer Reference (UTR) number within 10 days via post (21 days if you’re abroad). After that you will then receive an activation code for your account and you are ready to go. You then have everything you need in order to get started filling in your self-assessment tax return. Just remember to keep this information somewhere safe - you will need it fairly frequently during your tax journey!
What information is needed for your Self-Assessment Tax Return?
Okay, so you’ve signed up to HMRC, you have your Government Gateway ID & Password, and your UTR number – now what? Well, now you can get started filling in your self-assessment tax return, and you are well on your way to submitting it!
To fill in your self-assessment tax return, there are a few core pieces of information that are needed:
Your Unique Taxpayer Reference (UTR) number
Your National Insurance Number
Any details about income during the tax year – this can be from any of the sources explored above, like from rental income, self-employed work, dividends, shares, etc.
Any details or records about expenses relating to self-employment or property income
Any details about charitable contributions that may be suitable for tax relief
Any details about your pension contributions
Details of any CIS deductions
Your P60, or similar document, showing how much income you have already paid tax on if your additional income is over and above your current salary
The above may seem like a long list, but having the above items to hand will make your life easier (we promise!) when it comes to filling in your tax return.
How do I complete my Self-Assessment Tax Return?
Unfortunately, when talking about tax, there is some jargon that is unavoidable if you do you tax return on the HMRC website. The main part of a tax return is known as the SA100 (which stands for “Self-Assessment 100”). The SA100 is an 8 page form that takes you through:
Your basic information – DOB, name, address etc.
Why you are filling out your Self-Assessment – the good news is that this is mainly tick boxes where you just need to tick the reason
Your income from various different sources
Any tax relief you receive
Any student loan or postgraduate loan repayments
Any High Income Child Benefit charge
Any Marriage Allowance
Any details in case you have paid too much tax or need tax refunded
The name of any tax adviser you may have (and their details)
Any other notes
Finally, a declaration
When approached as “SA100” it can seem very official and daunting. When broken down however, the SA100 is just a simple tax return form that requires basic information. It’s not that scary at all.
Of course, HMRC does have a way of over complicating things. Where most people will just need to fill out the basic information, there are other forms that you may need to look into in more detail to supplement the core SA100 form. Once again, these are relatively simple, and tend to be much shorter as they are only supplementary. Those forms are:
SA102 – for employees or company directors
SA103S or SA103F – for self-employment
SA104S or SA104F – for business partnerships
SA105 – for UK property income
SA106 – for foreign income or gains
SA108 - for capital gains
SA109 – for non-UK residents or dual residents
You can find out more about the various different tax returns here.
Can I fill in my Self-Assessment Tax Return using software?
Yes, software can help you fill in your self-assessment tax return! Great news, right?
Depending on the type of tax return you need to fill in, there is HMRC recognised software (like Simple Self-Assessment) that can help. At APARI, our software has been designed to not only help you with the core tax return (SA100) and calculation (SA302), but also many of the additional bits of information you may need to submit.
You have better things to do than filling in tax returns, and filling out forms can be a real pain. We want to make it as easy as possible for you to complete what you need to and move on with your life. Which is why at APARI have simplified and condensed the tax return for our users. We will even pre populate fields where possible.
How do I work out my Self-Assessment Tax bill?
We have a really nice cheat answer here. If you are using software (like Simple Self-Assessment) then we can calculate your tax bill in real time. This makes it a lot easier and always gives you visibility over what you owe and when. Needless to say, unless you really love spreadsheets and keep your own precise tax calculations, then this is one of the most convenient ways to keep an eye over how much tax you are likely to owe and when it should be paid.
At APARI, we actually give you access to our HMRC-recognised tax calculator for FREE. Then, when you’re happy and ready to submit, you’ll get instant, official confirmation from HMRC.
This will also be updated in your HMRC online account up to 72 hours after you have submitted your tax return.
What is a SA302?
Remember earlier where we mentioned SA302 under the list of forms we can help you with? Well, now it is time to explore what they are.
An SA302 is a form that you can request from HMRC as evidence of your income. They’re often needed to help prove income for things like mortgage applications if you are self-employed. At APARI, we are working towards helping you with your SA302, or you can request it from HMRC.
Part 3: Payment and Deadlines
Now you know what self-assessment is and how to submit. Now comes the bit nobody looks forward to – paying it! Well, don’t worry, we’re going to talk you through it - making finishing off your self-assessment tax return as painless as possible.
How do I pay my tax bill?
Through their software, HMRC will send you (or make available to you) your bill. There are actually seven different methods for paying that bill depending on your preference:
Direct Debit
Through online banking
Through CHAPS
Through a debit or corporate credit card online
At your bank/building society
Bacs
By cheque
Depending on the method you choose, you may need to wait up to five working days, so it’ is best not to leave it until the last minute.
When do i pay my tax bill?
Although the tax return deadline is the 31st January, the payment is actually split into 3 parts.
If your liability Is over £1000 then you will be required to make Payments on Account towards your next years tax liability. Your payment on account is calculated by using the last years liability - 50% of this liability is paid on the 31st January as Payment on Account 1. Another 50% is then due before the 31st July - this is known as Payment on Account 2. You are then required to pay the balance after calculating the years actual liability, before the following 31st January.
This can seem a bit confusing, so we have put together this short video to help explain!
What if I can’t pay my tax bill?
One of the nice things about dealing with HMRC is that there are options if you aren’t able to pay your tax bill, or if you can’t pay on time.
No matter what, if you are unable to pay your tax bill, you need to contact HMRC straight away to arrange an alternative. In the case that the amount owed is under £30,000, then it may be possible to set up an alternative payment method such as paying your tax bill in monthly instalments - this is called a time to pay agreement.
It is worth noting that, if you are late, HMRC will charge interest on the amount you owe – so you will need to pay that off as well. You can find out more about your options if you cannot pay your self-assessment tax return bill here.
What are the deadlines for filling out my Self-Assessment?
The current deadlines for filling in your self-assessment tax return are:
5th October – Registering for Self Assessment
31st October – Paper tax return (if you have chosen to do a paper return as opposed to an online return)
31st January – Online tax returns and paying any balance on the previous year tax
That being said, when Making Tax Digital comes into effect, the way self-assessment tax returns are submitted will change. Throughout the year, rather than having one large submission, there will be 5x the number of submissions needed, with both quarterly submissions and a final submission needed. Don’t worry though – although it may be 5x the submissions, at APARI we are dedicated to making it 10x easier. More doesn’t necessarily mean harder!
If anything, through Making Tax Digital, it will give you better visibility over your tax position, which is kind of exciting for us tax geeks. For everyone else it is useful for planning or understanding cash flow.
What are the penalties for not completing my Self-Assessment Tax Return on time?
There are unfortunately penalties in place for not filing a return on time.
If your return is up to 3 months late then there is a fee up to £100, plus interest on any late payments. For self-assessments over 3 months late then the fine could be much larger.
If there is a good reason for not having filed your return then you can always appeal any fine or penalty. Be warned though that it needs to be a good excuse. Otherwise, you will end up having to pay the penalty anyway.
Part 4: Software, Accountants, and Moving Forward
Phew! So far we have covered a lot of ground, and you’ve done well. We’re almost there! If you’ve followed this article then you now know what self-assessment tax returns are. You know if you need to fill in a self-assessment, how to fill in an assessment, and when you need to submit by. By now you’re at the point where you can put your feet up. Congratulations, you have filled in your return and submitted it.
But what is next?
So, now you know about your return there are a few other ideas that need to be explored. Do you need an accountant? What can software do and what are the benefits? What will the future hold? Well, let’s take a quick look.
Should I pay an accountant to do my Self-Assessment tax return?
Ahh, the common question of whether you need an accountant or whether you can live without one. Unfortunately, there isn’t a cut and dry answer. While you don’t strictly need an accountant, you may still want one if:
You have complicated or multi-level tax affairs
You have tax planning schemes in play
You’re not very organised, or you happen to really like your accountant
That being said, you don’t necessarily need an accountant, and you can do without one if you have the right HMRC recognised software (Simple Self-Assessment) in play. Software can be really helpful, and you may want to consider it if:
You’re new to self-assessment and self-assessment tax returns
You’re already keeping track of your income, expenses and other information for your tax return
You’re tax confident – whether you are new to tax or an old hand, software can be seriously helpful.
Finally, you may want to consider using software if you want to be ready for Making Tax Digital. MTD is coming, and eventually it will become mandatory for digital record keeping. Signing up now allows for you to be ahead of the curve, and will potentially make your life easier in the long run.
How does Self-Assessment tax return software work?
The HMRC has, over the past few years, recognised additional software (such as APARI) as being compatible with Making Tax Digital for Income Tax. What this means is that software, like APARI, can be used in order to help manage your taxes, making the whole process a lot easier for you in the long run. Software allows for you to put together your tax return and submit it in a far easier way, whilst reducing the potential for mistakes. It’s that simple.
What are the benefits of completing your Self-Assessment online tax return?
Where we can’t talk about the precise benefits of using other types or brands of software, we can talk about what the benefits are for completing your tax return through APARI. If you chose to sign up with APARI, then you could:
Start keeping digital records to easily track income and quickly allocate expenses
Scan and store paperwork like receipts and contracts
Save time with our business toolbox, including keeping track of contracts and insurance, and getting renewal reminders.
Keep your information safe with secure software
See your profits in real-time, as well as your expected tax, through keeping a clear picture of your finances
Take advantage of cloud-based computing with mobile, tablet, and laptop integration
Be confident that we’re HMRC friendly. We’re actually mentioned on the HMRC website as software that is compatible.
Finally, you can be MTD ready today. At APARI, we offer our a free trial of our best features, so you can be sure that your Making Tax Digital solution does exactly what you need.
How can Apari help?
So, there you have it, a full exploration of self-assessment tax returns, from the initial application through to completion and beyond. Now, the only question to answer is: how can we help you?
As mentioned above, and throughout the article, at APARI we are not only experts in tax, but we are experts in tax simplification. We understand that tax isn’t the easiest thing to come to grips with, and it can sometimes feel like a nightmare for sole traders or landlords who just want to be able to do what they do best. That is why, at APARI, we want to make sure that self-assessment tax returns can be made easier for professionals who want to be able to sort out their tax quickly, efficiently, and with minimal stress.
Our services are specifically guided towards sole-traders and the self-employed, as well as landlords. You can get started today.