What is Self Assessment?
Self Assessment is the name of the system used by HMRC to collect Income Tax.
It’s mostly used by people who are self-employed, or landlords with rental income. But it can also be used by partners in a business partnership, if you have to pay Capital Gains Tax, if you have to pay the High Income Child Benefit Charge, or if you’ve simply got any untaxed income, such as income from savings, investments or pensions.
To use Self Assessment, you’ll first need to register with HMRC. This gives you a Unique Taxpayer Reference, or UTR, that will be linked to your account. Each year you can then either send a paper tax return by 31 October following the end of the tax year, or submit an online tax return by 31 January. The majority of people use the online service.
The tax return details your business income and expenses, by which your tax liability is derived. If you use the online Self Assessment tax return, HMRC will calculate this for you.
Any outstanding tax liability must be paid by 31 January, as well as any payment on account for the current year, if HMRC has agreed this with you.
If you’re employed then Income Tax is collected automatically by your employer from your wages via the Pay as you Earn (PAYE) system, so there’s usually no need to use Self Assessment unless you have additional income outside of this (e.g. you’re a landlord, or you have a side hustle that generates more than the £1,000 trading allowance).
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