UK self-assessed tax-filing simplified

Self-assessment places the onus on taxpayers to ‘self-assess’ their tax liability. That means that it is the responsibility of the taxpayer to be aware of their obligations and whether they need to file a tax return.

Below is a list (not exhaustive) of circumstances which require a taxpayer to file a tax return.
You need to file a UK tax return if:

• you’re self-employed
• you’re a company director, minister, Lloyd’s name or member
• you receive any of the following:
  • income from savings and investments of £10,000 or more
  • income from untaxed savings and investments of £2,500 or more
  • income from property (before deducting allowable expenses) of £10,000 or more
  • income from property (after deducting allowable expenses) of £2,500 or more
  • annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income)
  • income from the estate of a deceased person on which tax is still due
•  you’re in receipt of foreign income that’s liable to UK tax
• you have annual income of £100,000 or more
• you need to claim expenses or professional subscriptions of £2,500 or more
• you need to claim some less common reliefs, such as Enterprise Investment Scheme relief or relief on

Venture Capital Trusts, these can only be claimed by completing a tax return

• Capital Gains Tax is due
• You live or work abroad or aren’t domiciled in the UK

The tax year ends on 5 April. If you are filing on paper you must file before 31 October following the end of the tax year. If you are filing online you must file on or before 31 January following the end of the tax year.

Any balancing payment of tax is due to HMRC by 31 January following the tax year in question.

If you do not file your tax return correctly and on time, it’s likely that you will incur fines and penalties from HMRC.

A sole trader is someone who carries on a business in their own name which is not conducted through a limited company.

The general rule is that expenses incurred wholly and exclusively for business purposes can be taken as a tax deduction.
For more information you can read our Guide to Allowable Self-employment expenses.
In some cases, i.e. with capital items like plant and machinery, cannot be written off against income in one tax year. The cost is written off over several years. The mechanism for this is Capital Allowances – basically tax approved depreciation.

If you are a self-employed sole trader you will need to keep all invoices, receipts, bank statements etc to prove the income and expenses declared on your tax return. In general, HMRC advises that you keep sufficient records to support any figures on your return for a minimum of 6 years after it is filed.
As mentioned above HMRC can levy penalties for inadequate record keeping; this is an area of particular interest to HMRC at present and they intend to check 200,000 small business records between 2011 – 2015.

Yes. If you are in receipt of property income of £10,000 or more (before deducting allowable expenses), you are required by law to file a self-assessed tax return.
Property income is income that comes from a property which is purely owned to generate revenue. Such properties include those which generate rent, such as houses, flats and land.
In other cases, HMRC should make an adjustment to your PAYE code to collect any tax due on such income.

Income received from non-UK properties, will be exempt from UK tax.
If a tenant living in the UK rents a property from a landlord who lives outside the UK, the landlord will still pay UK tax on the rental income even if he / she doesn’t live there because the property is situated in the UK.

Expenses are only eligible as a tax deduction if those expenses are incurred ‘wholly and exclusively’ for the business of letting. Examples of deductible expenses will include agent fees, wear and tear and commissions. For example, if a tenant breaks a window and you repair that window this is a genuine repair, and the cost can be deducted from rent.
Any water charges or council tax paid by a landlord are deductible expenses, as is any interest paid on a loan taken out to purchase the property in the first place. Insurance premiums are also deductible.
Taxback will ensure you avail of every tax expense and deduction that you’re entitled to.

Where expenses exceed income, a property business loss will arise. If you have several sources of UK property income, all profits and losses in the year are pooled together for these purposes to give an overall profit or loss for the year. If a taxpayer has a property business loss, that loss can only be carried forward and set against property income from a UK property business in future tax years. It cannot be set against non-rental income nor can it be carried back to a previous year.
You should note that an overseas property loss, (for example, a loss on a villa in Spain or Ireland), cannot be set off against UK property business income. This also applies the other way around so there is never any mixing of UK and overseas property business profits and losses. If you have an overseas property business loss, that loss can only be carried forward and set against future overseas property business income.

If a landlord is letting out a room to a tenant in their home (i.e. their only or main residence) a special relief is available. However, it’s important to note that the landlord and tenant must be living in the same property.
If the tenant pays the landlord a rent of say, £50 a week, this is strictly chargeable to tax as property income. However, where gross rents are not more than £4,250 a year, rent-a-room relief can apply and the rental income is exempt from tax.

CIS is the Construction Industry Scheme, a scheme which obliges contractors to deduct UK tax at source on payments to self employed subcontractors.

No. CIS is only applicable for self-employed taxpayers. Construction workers and employees are subject to PAYE and National Insurance contributions as per normal.

CIS covers construction operations carried out in the UK. As a general rule, the scheme includes almost any work that’s done to a:

• permanent building
• temporary structure
• civil engineering work or installation

If you are paid gross then you are highly unlikely to be due a tax refund as tax refunds arise when the tax deducted exceeds the actual tax liability.

CIS sole traders can claim a deduction for ANY expense incurred wholly and exclusively for business purposes e.g.:

• Tools
• Travel
• Vans
• Wages
• Materials
• Accountancy fees
• Advertising
• Stationary
• Telephone/internet
• Website

To claim a refund, a tax return must be filed with HMRC. Taxback offers a free paid estimation service that can advise you of how much tax you may be due back with no obligation to use our service.

As a self-assessed taxpayer, you must comply with the same rules as other taxpayers and keep records to support all the figures on your return for a minimum of 6 years.