Self Assessment Tax
For the majority of taxpayers in Britain the tax system is something for which little or no thought is required. Most of those who pay tax do so through the Pay As You Earn, or PAYE, system, which automatically deducts tax payments from the wage packet. As a result, very little action is required on the part of the payee.
For others, however, payment of tax is a more complex affair. If you are not covered by the PAYE Scheme, you will be required to go through the process of self assessment. This particularly applies to those who are self-employed, as well as some pensioners and other individuals.
The Self-Assessment Process can seem more daunting than it actually is. If you feel overwhelmed by the fairly lengthy forms that you are required to complete, just remember that a huge number of people have to do the same thing every year. It is also worth remembering that, while they work hard to collect the right amount of tax, HM Revenue & Customs (HMRC) are not ’out to get you’ or deliberately trying to catch you out. A relaxed attitude is all-important for taking the stress out of self assessment!
Self-Assessment FormsThe self-assessment process hinges on the self-assessment form, which was traditionally sent to all affected tax-payers by post, but which can now also be completed online. The information that you give on this form is then used by HMRC to determine how much you are required to pay in tax. Alternatively, you also have the option of performing these calculations yourself. Don’t be tempted to ‘underestimate’, as you will inevitably be found out and will be faced with a hefty bill to pay afterwards.
Most self-assessment taxpayers are only required to fill out the ‘basic’ self-assessment form. This is only four pages long, and will generally apply to those who are self-employed with an annual turnover of less than £15,000, pensioners, or some employees. On the other hand, if your affairs are more complex (for example, if you receive several different types of income), you will be required to fill in the full 12-page document, as well as some of the extra pages that apply to different situations.
Important DeadlinesIt is very important that you register as a self-assessment taxpayer as soon as you think you have become one. This can be done by contacting your Tax Office directly. You may receive a self-assessment form immediately; if not, you will receive one in April along with everyone else.
There are a series of important deadlines that you must stick to during the tax year. In the first instance, it is important to remember that you must inform your Tax Office of your new employment status within three months of the change. After this, there are well-publicised deadlines every year by which you must return your self-assessment form. If you miss this deadline, you will have to pay a penalty (if you are a day late there is a fixed £100 charge, and there are more heftier fines for further delays), as well as interest on any tax that is owing.
HMRC has 12 months in which to process your return and inform you of your tax bill. They perform a series of random checks on some returns, as well as individual checks that might be caused by anomalous figures. As a result, you shouldn’t be surprised or scared if you receive a call from HMRC within the 9-12 months after you return your self-assessment form.