Self assessment tax is a system used by HM Revenue & Customs (HMRC) to collect tax from individuals who are not taxed through the PAYE (Pay As You Earn) system. If you fall into one of the following categories, you may be eligible for self assessment tax:
Recommended Making Money Books
Self-employed individuals
If you are self-employed and earn income from running your own business or providing services as a sole trader, you will need to complete a self assessment tax return. This includes people who are freelance, contractors, consultants, or run their own small business.
Landlords
If you earn rental income from letting out a property or properties, you will need to complete a self assessment tax return. This includes people who own buy-to-let properties or rent out a room in their home.
Company directors
If you are a director of a limited company, you will need to complete a self assessment tax return. This includes both executive and non-executive directors.
High earners
If you earn over a certain threshold, you may be required to complete a self assessment tax return even if you are not self-employed or a landlord. For example, if you earn over £100,000 per year, you will need to complete a tax return to declare your income and pay any additional tax owed.
Those with multiple sources of income
If you receive income from multiple sources, such as employment and rental income, you may need to complete a self assessment tax return. This is because your tax liability may not be fully covered by your PAYE tax code.
Those with taxable foreign income
If you receive taxable income from overseas sources, you may need to complete a self assessment tax return. This includes income from foreign employment, rental income from overseas properties, or income from overseas investments.
It’s worth noting that even if you are not required to complete a self assessment tax return, you may still need to pay self assessment tax if you receive income from sources other than employment and your tax liability is not covered by your PAYE tax code.
How to register for self assessment tax
If you think you are eligible for self assessment tax, you will need to register with HMRC. You can do this online using HMRC’s online service. You will need to provide your personal details, including your National Insurance number, and information about your income.
Once you have registered, HMRC will send you a Unique Taxpayer Reference (UTR) and you will be able to complete your tax return and pay any tax owed using the online service.
It’s important to note that if you miss the deadline for registering for self assessment tax or submitting your tax return, you could be subject to penalties and interest charges. It’s therefore important to ensure that you register and submit your tax return on time.
Conclusion
Self assessment tax is a system used by HMRC to collect tax from individuals who are not taxed through the PAYE system. If you are self-employed, a landlord, a company director, a high earner, or receive income from multiple sources, you may be eligible for self assessment tax.
It’s important to ensure that you register for self assessment tax and submit your tax return on time to avoid penalties and interest charges. If you’re unsure whether you need to complete a tax return, you should seek advice from a tax professional.
Related Content