Self Assessment Made Simple: A Beginner’s Guide

Navigating the complexities of Self Assessment, especially for beginners, can be overwhelming. With the January 31st deadline for Self Assessment fast approaching, we’ve put together this handy blog post to demystify the intricacies of Self Assessment for a stress-free tax experience.

1. What is Self Assessment?

Self Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax on earnings from those who do not have this automatically deducted from their salary or pension.

2. Do I need to fill in a Self Assessment tax return?

If you’re self-employed, a company director, or dealing with various income sources, you need to fill out a detailed Self Assessment tax return.

3. Can I complete my self-assessment myself, or should I use an accountant?

Taking the DIY approach to Self Assessment might seem tempting, but the tax rules can be tricky, and mistakes can happen. That’s why getting help from an accountant is a smart move. 

A good accountant will make sure everything on your Self Assessment tax return is accurate and compliant with the regulations.

4. What are the dates that my assessment should cover?

Understanding the timeline is essential. Your Self Assessment covers income within the tax year, spanning from April 6th to April 5th. 

So, for the forthcoming January 2024 deadline, you would need to submit a Self Assessment tax return for the period April 6th 2022 to April 5th 2023.

5. What is the deadline for completing a Self Assessment tax return?

To avoid paying penalties, your completed Self Assessment tax return must reach HMRC by midnight on January 31st following the end of the tax year. 

6. I don’t have any tax to pay. Do I still need to complete a Self Assessment tax return?

Even if you don’t have to pay tax, you will still need to submit a Self Assessment tax return. This ensures compliance with HMRC regulations and contributes to a comprehensive understanding of your financial situation.

7. How do I register for a Self Assessment tax return?

Before you begin the Self Assessment process, if you have not previously submitted a self assessment, you need to register online with HMRC, providing essential information about your financial activities. This step is crucial to ensure you are in the tax system and can fulfil your obligations.

8. What information do I need to fill in a Self Assessment tax return?

The more detailed your records, the more accurate your assessment will be. You’ll need details on your income, allowable expenses, and supporting documents such as P60s, receipts, and invoices. 

We recommend keeping an organised record of these throughout the year to make the process easier.

9. How do I fill in a Self Assessment tax return?

You can complete your Self Assessment online with HMRC, but we strongly recommend professional assistance from experts like ourselves for enhanced accuracy.

We can guide you through the process, ensuring no critical details are overlooked, and may be able to save you money in the process (and in your future tax returns).

10. What are the supplementary pages of a Self Assessment tax return?

Supplementary pages cater to specific types of income, ensuring a thorough assessment. These can include employment, self-employment, and rental income. Understanding these nuances is vital for accurate reporting.

11. How do I work out my Self Assessment bill?

HMRC works out your Income Tax by adding up all your taxable income, subtracting allowable expenses, capital allowances, other allowances, and your personal allowance for the year. After that, they apply the appropriate tax rate to each income source.

12. What happens if I don’t know my profit for the tax year?

If you’re uncertain about your profit for the tax year due to factors like a different ‘accounting period’ or awaiting a valuation, estimate the tax and include those in your return, being sure to indicate that these are provisional figures. 

Once you know the exact amount, you have 12 months from the Self Assessment deadline to make corrections. Any tax difference will incur interest calculated from the original due date and overpaid tax earns interest in return.

13. Can I change my Self Assessment tax return after submission?

It is possible to amend a tax return, as long as it is within 12 months of the Self Assessment deadline. 

You can do this online or by sending another paper return, but you need to wait for 72 hours after filing before you can update your return. With the amended return, you may need to pay more or be owed a refund. 

However, seeking professional advice will eliminate potential pitfalls and ensure accurate reporting.

14. When do I pay the tax due, and how do I pay it?

The tax is due by midnight on January 31st, and payments can be made through various channels, including online, bank transfer, or other specified methods.

If you are making payments on account, there’s usually a second payment deadline of 31 July.

15. What payment options are there?

There are a range of payment methods available, allowing you to choose the one that aligns with your preferences and financial situation. 

Please note that you can no longer pay at the Post Office. 

Same or Next Day

– Online bank account
– Online or telephone banking (Faster Payments)
– Debit or corporate credit card online
– Bank or building society (with HMRC paying-in slip)

3 Working Days

– Direct Debit (if previously set up with HMRC)
– Cheque by post

5 Working Days

– Direct Debit (if not set up with HMRC before)

Note: If the deadline falls on a weekend or bank holiday, ensure payment reaches HMRC on the last working day before (except for Faster Payments or debit/credit card payments).

16. Paying tax in advance – Budget Payment Plans

A Budget Payment Plan is an effective way of managing your finances and ensuring you fulfil your tax obligations on time.

This voluntary plan gives you a convenient and flexible method for paying taxes, allowing you to set up regular payments either weekly or monthly to HMRC. This can be particularly beneficial if you have a fluctuating income.

17. What is the Time to Pay service?

The Time to Pay service allows individuals facing financial constraints to negotiate a payment plan with HMRC. This service can provide relief during challenging financial periods.

You can set up a Self Assessment payment plan online if you: 

– Have filed your latest tax return
– Owe £30,000 or less
– Are within 60 days of the payment deadline
– Do not have any other payment plans or debts with HMRC

18. What penalties can I be charged under Self Assessment?

Late submissions or payments under Self Assessment can incur penalties from HMRC, structured as follows:

Up to 3 months late

An initial penalty of £100. This applies even if you have no tax to pay or have paid any tax due.

More than 3 months late

If your tax return is over 3 months late, additional daily penalties of £10 per day can accrue, up to a maximum of £900 after 90 days. This is in addition to the initial £100 penalty.

6 months late

If your tax return is 6 months late, HMRC will impose a further penalty of 5% of the tax due or £300 (whichever is greater). This is in addition to the penalties incurred for the initial and daily late submissions.

12 months late

If your tax return is 12 months late, another 5% of the tax due or £300 (whichever is greater) will be levied. This is in addition to the penalties accrued in the previous stages.

Late payment

On top of interest, a 5% surcharge is charged on any balancing payment (but not the next year’s payment on account) not paid within 30 days of the due date (i.e. unpaid by 2nd March), with further surcharges due when the payments are 6 months and 12 months overdue. These surcharges do not apply if you are operating under a Time to Pay arrangement (see above).

Exceptional cases

In certain exceptional cases, the penalties may be higher, up to 100% of the tax due.

Penalties are another reason to seek professional advice, so you can avoid these charges altogether!

19. What if I can’t afford to pay my tax bill?

Promptly seeking professional advice is crucial if you find yourself unable to pay your tax bill. Options like negotiating a Time to Pay arrangement or accessing financial support can be explored. 

We can provide tailored guidance based on your specific financial circumstances, helping you navigate challenging situations.

20. What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax is a new initiative for recording and reporting income and expenses for individuals who are self-employed or receive property income. It aims to digitise and simplify the tax system. 

To comply with Making Tax Digital for Income Tax by April 6, 2026 you need to:

– Be registered for Self Assessment.
– Receive income from self-employment or property, or both.
– Have a total qualifying income exceeding £50,000.

For April 6, 2027, compliance, you should:

– Be registered for Self Assessment.
– Receive income from self-employment or property, or both.
– Have a total qualifying income exceeding £30,000.

Find out more here.

We can guide you through the transition, ensuring your systems are compliant and you remain on the cutting edge of tax technology.

21. Where can I find more information or get help?

HMRC’s official resources are fantastic for Self Assessment guidance, but there is a lot to digest. 

Consider seeking assistance from an accountancy firm that can provide tailored advice based on your unique financial situation.

With our expertise, you can navigate the evolving tax landscape confidently, knowing that you are well-informed and supported.

How we can help

At CRM Accountants, we bring a wealth of experience and a client-centric approach to ensure your financial affairs are in the best possible hands. 

Whether you need assistance with completing and filing your Self Assessment tax return, or more general tax advice, our dedicated team is here to offer personalised support. 

Next steps

For any advice on Self Assessment or accounting services tailored to your business needs, you can count on CRM. Get in touch by filling out our contact form or give us a call at 01865 379272.

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