Self assessment is a method used to report your income to HMRC and pay the relevant income tax and NICs where applicable.
Employees have their income tax and NICs deducted from their pay prior to being paid. As a
self-employed individual, you will need to know how to do self assessment to manage and pay your own taxes.
If you are operating as a sole trader and earned more than £1,000 income from your self employment
business in a tax year, you will need to complete a self assessment tax return, although you may not be required to pay any taxes.
If you are operating via a limited company and paying yourself a salary over the lower earnings limit (£12,570 for 2022/23) in addition to, or instead of, dividends, then you will also need to complete a self assessment tax return.
There are other reasons why you may need to submit a tax return, for example, if you have received untaxed income such as that obtained from:
If you are unsure whether or not you should register to complete a self assessment tax return, take a look at the multiple-choice questionnaire on the .gov website.
For your first self assessment tax return, you will initially be required to register for self assessment. You should be aware that the entire registration and set-up process for SATRs could take up to 20 working days. Because of this, if you need to register for the service, you should do so well in advance of the deadline (5th October in your second tax year).
Step 1: Visit www.gov.uk/self-assessment-tax-returns/self-employed/
Step 2: Follow the links to register online, or fill and print the postal form
Step 3: Complete your registration. You will receive your Unique Taxpayer Reference (UTR) alongside instructions to create your Government Gateway account.
Step 4: Activate your Government Gateway account. You will receive an activation code in the post. It is important to keep your log in details safe as you will need these details to complete your self assessment tax return.
If you are submitting your self assessment tax return online, follow the process below to submit a self assessment tax return:
Step 1: Sign in to your Government Gateway account.
Step 2: Select the 'Complete your tax return' link under 'Self Assessment'.
Step 3: Complete the information requested as prompted.
Step 4: Check your return is correct, view your tax liability, and submit when ready.
If you are completing a paper tax return via post, you will need to download and print form SA100 from the .gov website. If you are not able to download the forms yourself, you can call HMRC and have them sent to you. You can do this here.
To complete your tax return, you will need the following information:
Your ten-digit UTR provided to you when you registered for self assessment
Your National Insurance number
Detailed of any untaxed income from the previous tax year
Record of any already taxed income (P60)
Record of relevant expenses
Record of any contributions to a pension or to charities
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Register for Self Assessment - 5th October
Complete Paper Tax Return - 31st October
Complete Online Tax Return - 31st January
Pay Tax - 31st January
The above dates apply after the end of the tax year in which you started trading e.g. if you start your self employed business in July 2021, you will need to register by 5th October 2023.
You should note that automatic interest and penalties apply for failure to file your tax return and pay your tax on time.
Whilst HMRC might send you a notice to complete a tax return, it is important to note that you should not rely on HMRC to remind or inform you. As a self-employed individual, completing tax returns in a timely manner is solely your responsibility.
That being said, if HMRC have served you a notice urging you to submit your self assessment tax return, whether or not you owe any tax, it must be completed.
You may receive a penalty if you miss the deadline to register for self assessment, submit your tax return, and/or pay your resulting tax bill.
For tax returns up to three months late, you will pay a late filing penalty of £100. Any later than three months and the penalty rises. You will also be charged interest on any late payments.
Should you wish to appeal a penalty, you can do so here.
Although the deadline is strict, if you realise you may have made a mistake whilst submitting your SATR online, you may go back and make changes up until the filing deadline for the next tax year. In other words, up to a year after the initial deadline for submission.
When submitting your SATR online, you can save your progress as you go, giving you plenty of time to think about your answers or return and correct any previous answers.
It is always recommended to complete your SATR well in advance of any deadlines, this way there is always time to fix any errors.
A payment on account is an advance payment on your next tax bill. It is a way for HMRC to ensure that you can’t benefit from paying your tax in arrears.
You will need to pay in this manner if your previous self-assessment tax bill was more than £1,000 and you didn’t pay more than 80% of your taxable income through PAYE (in employment income), so for those in full-time self-employment, this is likely to apply.
Payments on account are paid twice a year (by 31st January in addition to the balance due for the previous tax year, and by 31st July). They each equate to 50% of your previous year’s tax bill.
Your total tax bill for the 2020/21 tax year was £5,000 which was paid by 31st January 2022.
You pay your first payment on account for the 2021/22 tax year also by 31st January 2022 of £2,500 (50% of the previous year’s total bill).
You pay your second payment on account for the 2021/22 tax year of £2,500 by 31st July 2022.
Your total 2021/22 tax bill is £7,000.
By 31st January 2023, you pay the remaining balance of £2,000 plus the first payment on account for the 2022/23 tax year of £3,500.
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