In the UK, most people don’t need to report what they earn to HMRC (the UK tax authority). If you have a job with an employer then they will take tax off before paying you – this is known as pay as you earn (PAYE).
But if you work for yourself, have other sources of income such as a property, make a significant gain when you sell an asset, or earn a salary above £100k then you need to report what you earn to HMRC, through a scheme called “self assessment”.
Self assessment involves reporting income and expenses once a year by completing a tax return. This process will also tell you what you need to pay HMRC.
Self assessment tax - What you need to know:
- Tax years run from 6 April to the following 5 April (so the 2019/20 tax year was from 6 April 2019 to 5 April 2020)
- Deadline for registering as self employed for 2019/20 – 31 October 2020
- Deadline for submitting a tax return for 2019/20 – 31 January 2021
- Deadline for paying tax due for 2019/20 – 31 January 2021
- To file tax returns, you’ll need your Unique Taxpayer Reference
- If you file directly with HMRC you’ll also need to be able to log in to HMRC – usually using a Government Gateway login
- Register for self assessment and file here [https://www.untied.io/revolut_and_untied_6823499v/]
- Download untied here
What taxes does self assessment cover?
Self assessment covers personal taxes – including checking that you’ve paid the right amount on your salary and other sources of income where tax is deducted at source.
If you are self-employed in your own name, then you’ll probably pay two types of tax.
The first one is income tax. Most people can earn up to £12,500 without paying any tax – this is the “personal allowance”. Beyond this, you’ll need to pay tax, starting with the basic rate of 20% in England. In Scotland, there is a starter rate of 19%.
The second type is called National Insurance. It has different limits to your income tax; if you don’t pay National Insurance it could affect the pension you get when you retire which is why you may sometimes see an option to pay more.
I’m earning a small amount of self employment income – do I need to complete a self assessment return?
You can earn £1,000 a year for each of self employment income and property income without needing to report this to HMRC or complete a self assessment return.
I’m earning under the personal allowance – do I need to complete a self assessment return?
Yes! Even if you earn under the personal allowance, if you are self-employed and earning more than £1,000 you still need to file a self assessment tax return unless HMRC tells you that it isn’t needed.
Newly self employed? Stay tuned for an additional blog post on setting yourself up as self-employed with HMRC.
How do I create and submit a self assessment tax return?
The first stage is to check that you need to complete one. You will either have received notification from HMRC that you need to file, or register with them to file.
There are three ways to submit your self assessment:
- working things out for yourself and filing directly with HMRC (you’ll need to register with HMRC and use what’s known as a Government Gateway login)
- using an accountant or advisor
- using an automated service – which is where untied fits in
Automated services remove a lot of the admin from taxes. It’s not just about the submission, but also all the work gathering information and making tax sense of it.
Instead of expecting you to learn complicated rules, we built our app to ask questions that you know the answer to, and use this to create the data to send to HMRC. Each time you make a transaction, your draft tax return is updated. So it’s ready for you to submit at the end of the year.Sign up in minutes
- What does EBIT mean?
- EBITDA: What is it and why is it important?
- How to value a business
- Do I need to complete a tax return?
- What is a business tax account and how do I set one up?
- How to register for corporation tax
- How much tax does a small business pay in the UK?
- What is small business tax and who pays it?
About the author
Kevin Sefton is a co-founder of untied. Originally a tax accountant with a big firm, he has been self-employed and worked with SMEs for a lot of his career. In the last few weeks he has been organising outdoor cooking classes with his neighbours.
Alicia is a School of Business and Management final year student at Queen Mary University of London studying Accounting and Management, and is interning with untied over the summer.
untied makes people’s taxes quick and easy, supporting the 12 million people in the UK who submit a personal tax return including 6 million self-employed. untied is available on Android and iOS with five star ratings, and also has a “untied for gig workers” service. However you earn, untied can help. And there’s professional support if you need it.
The award-winning business’s investors include Barclays Bank. untied is regulated by the FCA, supervised by the Institute of Tax and recognised by HMRC. To find out about untied’s plans starting at £40 a year, click here.