Self-assessment: What is it and do you need to do it?

With the January self-assessment deadline fast approaching it is time to get your tax return information in order, to avoid any potential fines later on

Every year, many thousands of people miss the deadline for submitting their self-assessment tax return, and are fined as a result. Around 870,000 people missed the 2016 deadline, receiving an initial £100 fine, plus extra penalties in some cases.

So what is self-assessment, who needs to do it, and what are the challenges people face when submitting their return?

What is self-assessment?

Self-assessment is a system HMRC uses to collect income tax. “If you are a full-time employee then tax is usually deducted automatically from wages, pensions and savings,” says Helen Morrissey, Personal Finance Specialist at Royal London. “However, the self-employed and people with income from other sources must report this in a tax return.”

Who needs it?

The website outlines who will need to fill out a self-assessment tax form. These include:

What do you have to do?

You can send your self-assessment tax return either online or on a paper form. The deadline for submitting the paper form was 31 October 2017, but the deadline to submit the form online is 31 January 2018. The period of time covered will be the 2016–2017 tax year, which ran from 6 April 2016 to 5 April 2017.

If completing the form online, you will need to submit your tax return via the Government Gateway service. To do this you will have to enrol for the service with HMRC and receive your Unique Tax Reference (UTR).

Activating your account can take up to 10 working days and it can take a further 10 working days to receive your UTR. “Many people do not realise this and try and set up their account at the last minute, meaning they miss the deadline,” says Helen.

The information you need

While you are waiting for your activation and UTR it is a good idea to gather the information you will need to fill out your form.

If you are self-employed you will need any invoices and receipts for work you carried out during this time, as well as bank statements and interest certificates.

If you are claiming due to Child Benefit issues then copies of either your or your partner’s P60 will give you important information needed to fill out the form. Paperwork for any investments will also prove useful.

Getting help

“If the situation is relatively straightforward, for instance, someone doing occasional freelance work, then filling in the form should only take a matter of hours,” says Helen. If you have any queries, contact the HMRC helpline on 0300 200 3310.

If you feel like you need more support, it might be worth enlisting the services of an accountant to help you file your tax return.

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