What is a Self Assessment?

Basically, Self Assessment is HMRC's method of finding out the income tax and National Insurance you owe on any salary that is not determined at source. Employees' income tax is naturally deducted from their business wages – this is not the case for self-employed workers, or for some different types of pay, for example, profits or payments from reserve funds and speculations, which is where self-evaluation comes in.

 If you have to submit a self-assessment, you must complete it at that time and submit it to HMRC (usually on the web) before 31 January. HMRC will use the data you provide to work out how much income tax and national insurance you will have to pay (which must be paid by 31 January).

Submit a Self Assessment

Any person who receives unencumbered salary at source must complete a self assessment. As a sole trader, the salary you receive from your exchange does not have National Insurance contributions or income tax deducted, so you will need to inform HMRC of that salary on the self-assessment structure so they can trace whether what, assuming any, tax you owe.

If you are a director of a limited company, you will as a rule need a Self assessment tax return document. Different examples of salary not burdened at source could include rental payments from any property you own, payments from abroad, or enterprise (profit) salaries.

A full list of who needs to complete a Self Assessment is available on the My Account Filing site – there's also an online tool on the site that will tell you whether you need to lodge a tax return or not.

When to complete a Self Assessment

You must lodge your Self Assessment by 31 January after the end of the tax year to which it applies. The tax year runs from April 6th to April 5th. However, you don't have to stop. If you are employed, you can submit your self-assessment when you receive your Form P60 from your employer.

If you run your own organisation, you'll need to supply Form P60 from your PAYE structure or have your bookkeeper set it up for you. If you are a sole trader, you can record your self-assessment at the end of the tax year. There are plenty of reasons why it's a smart idea to record your Self Assessment Tax Returns early.

Penalities and Fine if you don't register on time

If you have not informed HMRC, you may face fines or penalties and, where possible, you should submit Self assessment tax return for previous years. If you're unsure whether you've enrolled or not, you can contact HMRC with your National Insurance number to confirm.

If you don't file your tax return after enrolling for self-assessment, you may face some serious penalties. HMRC are becoming increasingly strict on deadlines and penalties for late returns, so we cannot stress enough how important it is to have your Self Assessment Tax Returns documented on time.