Of the many questions you’ll have when you first start to consider going self-employed, one unlikely to top your list is, “do I need to complete a Self Assessment?” It’s probably one of the most important ones, though.
A Self Assessment is one of the most significant tax documents you’ll be dealing with when you’re self-employed, and if you’re not careful, it could be the one that causes you the most headaches. So let’s take a look at exactly what it is, whether you’ll need to file one, and why it’s important to stay on top of it.
If you’d rather download a guide to read later, check out the jargon-free PDF Self Assessment guide below.
What is a Self Assessment?
Simply put, a Self Assessment (or Form SA100) is HMRC’s way of finding out how much Income Tax and National Insurance you need to pay on any income which isn’t taxed at source. Employees have their Income Tax deducted automatically from their employment income – this doesn’t happen for self-employed workers, or for some other types of income, such as pensions or income from savings and investments, which is where the Self Assessment comes in. Our Crunch Personal Tax Estimator is a simple spreadsheet to help you estimate how much you’ll need to pay each tax year.
If you need to file a Self Assessment then you’ll need to complete it and submit it to HMRC (usually online) before the 31st January deadline each year. HMRC will use the information you provide to calculate how much Income Tax and National Insurance you’re required to pay (which must also be paid by the 31st January).
As well as our detailed business guide above we’ve also got a handy article to help you if you’re a Self Assessment novice – read our article “How to complete your Self Assessment”.
Do I have to file a Self Assessment?
As a general rule, anyone who receives income that isn’t taxed at source needs to complete a Self Assessment.
In the case of a sole trader, the income you receive from your trade doesn’t have National Insurance Contributions or Income Tax deducted from it, so you need to tell HMRC about that income on a Self Assessment form so they can calculate what, if any, tax you owe.
If you’re a limited company director, you’ll usually need to file a Self Assessment to let HMRC know about any dividend income you’ve received form your company.
Other examples of income not taxed at source can include rental income from any property you own, income from abroad, or investment (dividend) income.
The complete list of who needs to complete a Self Assessment is available on the Gov.uk website – the website also has an online tool that will tell you if you need to file a return.
When do I need to register for Self Assessment – do HMRC issue me a Self Assessment notice or do I need to contact them?
If you meet any of the criteria that mean you need to complete a Self Assessment, the first step is to register. You need to do this by the 5th October after the end of the relevant tax year. For the tax year that ran from 6th April 2019 to 5th April 2020, the deadline for registration is 5th October 2020.
Registering for Self Assessment isn’t an automatic process when you set up a limited company or register as self-employed, so you’ll need to notify HMRC of your situation. You can do this personally by phoning the Self Assessment Helpline on 0845 900 0444 or registering online. Alternatively, if you’re a Crunch client, we can register you as part of our personal tax service (see below for details of the Crunch Self Assessment service for clients).
When do I have to complete a Self Assessment?
You have to file your Self Assessment by 31st January after the end of the tax year it applies to. Tax years run from 6th April to 5th April. You don’t have to wait, though. If you’re employed, you can submit your Self Assessment as soon as you receive your Form P60 from your employer.
If you run your own company, you’ll need to issue the Form P60 from your PAYE system or get your accountant to prepare it for you. If you’re a sole trader then you can file your Self Assessment as soon as the tax year ends. There are lots of reasons why filing your Self Assessment early is a good idea.
What happens if I don’t register and file in time?
If you fail to notify HMRC, you may face a fine or penalty and will have to submit Self Assessments for prior tax years where applicable. If you’re unsure whether you’ve registered, you can contact HMRC with your National Insurance number on hand to confirm one way or another.
If you fail to submit your return once you’ve registered for Self Assessment, you can incur some fairly significant penalties (we’ve got more information on the fines and penalties in our article – Self Assessment: what happens if I miss the deadline?). HMRC are becoming increasingly strict on deadlines and penalties for late returns, so we can’t stress enough how crucial it is to get your Self Assessment filed on time.
Paying your Self Assessment tax bill
Sadly filing isn’t the end of the story, you’ll also need to ensure you pay any tax owed by the deadline of the 31st January. HMRC will tell you how much tax you owe and you then hand over the cash, usually via Direct Debit or bank transfer (the full list of how you can pay is on the Gov.uk website). One last thing to remember is that since January 2018 you cannot use a personal credit card to pay your Self Assessment tax bill. You are also no longer able to pay your tax bill at the Post Office.
Don’t forget, you may also need to make a payment on account towards your next year’s tax bill. Our article “What is a payment on account and do I have to pay it?” explains more.
In January 2021 the situation will be a little different as the government announced that taxpayers could defer their July 2020 payment on account and has also announced that they will be offering ‘Time to Pay’ facilities for people struggling to pay their tax bills due to the coronavirus pandemic. If you can wecan, we recommend that you pay your tax bill in full by the usual date (31st January 2021, but i). If you need further more time to pay we explain your options further in our article on late payment fees and fines.
We take the pain out of Self Assessments
At Crunch, we’re experts at looking after life’s numbers, so you can trust us to make your Self Assessment as worry-free as it can be. Our expert chartered certified accountants will take care of you, just like we did for over 7,500 clients in the last tax year. Speak to one of our advisers to see how we could help you keep on top of your finances.
Self Assessment service for Crunch clients
If you’re a Crunch client, our Crunch Personal Tax Service takes away all the headache and hassle of completing and filing your personal tax, we’ll prepare your Self Assessment and once you’ve approved it we’ll submit it online and let you know how much you need to pay HMRC. Our Crunch Premium package includes up to two Self Assessments for directors, or the service is available as a paid add-on for clients on our other packages.
Contact your client managers for more information or visit the ‘Personal Tax’ tab in your account.
You can find full details and pricing on our Self Assessment Service page.