What is Self-Assessment? A No-Nonsense Guide for the Newly Self-Employed

Welcome to the world of self-employment! One of the first new responsibilities you'll encounter is the Self-Assessment tax return. While it might sound intimidating, it's a straightforward process once you understand the basics. This guide will walk you through what it is, who needs to do it, and the key dates you need to know.

What is Self-Assessment?

Self-Assessment is the system HMRC uses to collect Income Tax. Unlike traditional employment where tax is deducted automatically from your salary (PAYE), as a self-employed person, you are responsible for reporting your income to HMRC and paying the correct amount of tax yourself.

Who Needs to File a Tax Return?

You must send a tax return if, in the last tax year (6 April to 5 April), you were:

• A self-employed sole trader with an income of more than £1,000.
• A partner in a business partnership.
• A director of a limited company (unless it's a non-profit and you don't get any pay or benefits).
• Earning other untaxed income, for example from renting out a property or significant savings and investments.

Key Steps and Deadlines

The tax year runs from 6th April to 5th April. The process for a given tax year starts after it has ended.

1. Register for Self-Assessment: You must do this by 5th October after the end of the tax year you need to send a return for. HMRC will then send you a Unique Taxpayer Reference (UTR).
2. Keep Good Records: Throughout the year, keep detailed records of your business sales, income, and all your allowable expenses.
3. File Your Return: You can file online or by paper, but online is much more common and gives you more time.
   • Paper tax return deadline: Midnight 31st October.
   • Online tax return deadline: Midnight 31st January.
4. Pay Your Tax: The deadline to pay your tax bill is also Midnight 31st January. Many people also need to make 'payments on account' towards their next year's bill.

Top Tip: Don't leave it until the last minute! Filing your return early gives you plenty of time to sort out any issues and understand how much tax you need to pay, making it easier to budget.