A self assessment tax return is the process that all self-employed workers, sole trader and company owners must complete every year to pay income tax on their earnings. This is a system controlled by HMRC to ensure all working person(s) are paying the correct amount of income tax. Financial figures including earnings and deductions must be sent to HMRC yearly. The dates that these must be completed are between April and October for the previous year’s earnings.
Tax banding differs depending on your earnings, here is a table of figures to determine how much tax you will be required to pay:
Band Taxable Income Tax Rate
Personal Allowance Up to £12,500 0%
Basic Rate £12,501 to £50,000 20%
Higher Rate £50,001 to £150,000 40%
Additional Rate Over £150,000 45%
It is important that all receipts and bank statements are filed correctly throughout the financial year as the tax office may ask to view these as part of the self assessment process.
For employed or salary staff tax is usually deducted automatically out of wages before they are paid to the employee therefore, a self assessment tax return is not required for this type of work.
Completing your tax return is a process that you must follow, failure to do so will result in a fine and legal action being taken against you. Tax returns may look daunting or you simply may not have the time to complete. HMRC will support you with any queries you may have regarding your tax return. Alternatively, you could hire an accountant to take care of any financial tasks you need completing.