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27 May 2020

What is Self-Assessment?

Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax.  Tax is usually deducted automatically from wages and pensions via the Pay As You Earn (PAYE) method. People and businesses with other income must report it in a tax return.

Those using Self Assessment file an annual tax return to report their income.  The tax return covers the period 6th April to 5th April, with the tax return and any subsequent tax due by the following 31st January.  HMRC then calculate what you owe to factor in all of your income, as what you earn from one source may affect what tax you owe on another source due to the way our tax bandings work.

Using an umbrella company does not mean you need to file a tax return; however, if you do meet any of the following criteria, you may need to file.  These include if you:

  • are a company director and have income that is not taxed under PAYE.
  • are a sole-trader (self-employed).
  • have untaxed income. This could be, for example, interest or rental income that is not taxed before it is paid to you.
  • receive regular annual income from a trust or settlement, or you receive income from the estate of a deceased person, and further tax is due.
  • have taxable foreign income whether or not you are resident in the UK. This includes non-UK resident landlords.
  • have income from savings and investments of £10,000 or more before tax.
  • have an annual income of £100,000 or more before tax.
  • or your partner receives child benefit, and your income is over £50,000 (high-income child benefit charge).
  • have tax due at the end of the year that cannot be collected via your PAYE coding notice in a later year.
  • receive untaxed income of £2,500 or more.
  • claim for expenses is £2,500 or more.
  • have capital gains where you:
    • have given away or sold assets worth £48,000 or more for 2019/20; or
    • have a capital loss, but your gains net of any losses are more than the annual exemption for 2019/20 of £12,000; or
    • have no losses to claim, but your gains are more than the annual exemption for 2019/20 of £12,000; or
    • need to make any other capital gains tax claim or election for the year.

What to do if you need to file a tax return?

Don’t worry, we, or should I say our sister company, MyAccountant, can help!  Contact us or them directly on the link above to speak to a tax expert dedicated just to you.

  1. We will send you our tax questionnaire to gather your data and establish the pertinent facts to prepare your tax return
  2. If you have not filed a tax return in the past, we will register you with HMRC and obtain your Unique Taxpayer Reference (UTR)
  3. We will prepare your tax return and provide you with the SA100 form itself and a detailed tax computation
  4. Once approved, we will electronically submit your return to HMRC and provide an emailed receipt as proof for your records
  5. And that’s it!

We hope you find this guide helpful in answering some of your questions around self-assessment. If you require assistance and are already with SmartWork, all you have to do is contact your business manager. Otherwise, feel free to call 0800 434 6446 or e-mail us at info@smartwork.com.

For more relevant content aimed at freelancers and contractors, please visit the guidance section of our website and follow us on LinkedIn, Twitter and Facebook so you can see when we post a new article.

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