If you’ve not had experience completing a Self Assessment tax return, don’t panic. It’s not as complicated as it might seem but before you get started you should figure out if and why you need to complete a return:
- You’re self-employed on in a partnership
- You have side-hustles alongside your full-time job
- You have property earning rental income
- You’re a crypto investor with gains exceeding the CGT tax-free allowance
- You’re a limited company director with dividend income
- You higher income earner (over £50,000) and want to claim pension relief
How to do a Self Assessment tax return?
A lot depends on the type of tax return you need to file. The more reliefs you’re claiming for the more complicated your return will be, making it harder to do it on your own. For example, if you’re self-employed and become pregnant, you may start claiming the Maternity Allowance which will affect the calculations.
The margin for error is slim with HMRC so getting help may be worth considering.
Essentially, you have the following option:
- Doing your tax return yourself via HMRC
- Paying smart accountants to help you with it (…ahem)
When do I need to submit the return by?
There are two deadlines dates to keep in mind.
If you’ve never completed a tax return before, you’ll first need to register for Self Assessment and set up a government gateway login. In essence you’re informing HMRC that you’ve earned untaxed income. You should do this by 5th October in any given year, the process can take up to 14 days to complete.
When it comes to submitting your return online and paying your taxes, you should do this by 31st January the year after the tax year just ended. For example, if you’re submitting your 2020/2021 tax return, this should be done and paid by 31st January 2022.
Make sure that you do this on time, as late filings and payments will incur penalties.
Tax reliefs for landlords
If you’re a landlord, there are a few things to consider when you do your tax return:
- Do you live in the property you’re renting?
If you’re only renting a room in your property, you’re covered by the Rent-a-Room scheme. You can earn up to £7,500 per year tax-free. Anything over that and you’ll pay Income Tax.
- What if I don’t live in the property?
If you don’t live in the property you can claim the Property Income Allowance which gives you £1000 of your rental income tax-free. You can also claim a 20% tax relief on mortgage interest.
Read more about tax owed on rental income here.
Tax reliefs for self-employed workers
If you’re self-employed, you only pay income tax on earnings over the £12,500 Personal Allowance (as at the time of writing). You are also allowed to deduct your business expenses from your earnings.
If you do side gigs alongside your full-time job, you can make the most of the Trading Allowance which allows you to earn up to £1000 additional income tax-free. Beyond this, you must do a tax return at the usual rates of Income Tax and National Insurance.
I earn over £100,000
When you earn over £100,000, you’re classed as a high earner. Therefore, even though you pay your taxes through your salary, HMRC needs to check your income to ensure that you’re paying the correct amount of tax, also known as you adjusted net income. To do this, you’ll need to do a self assessment tax return.
It’s also worth noting that as a high income earner, you could end up paying a 60% effective tax rate! However, there are ways to reduce this. Read here to see how.
I’m an investor in stocks and cryptocurrencies
When you dispose of an asset you pay tax on your taxable gains, at the effective Capital Gains Tax rates. The CGT Allowance for the 2020/21 tax year is £12,300, meanings that any gains that are less than this limit are tax-free. There are other factors that affect the tax you owe on any investment profits, such as carrying forward losses, but it can all get a little bit complicated.