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Five things you need to know about self-assessment

Self-assessment means filling in a tax return each year, providing information about your income for Her Majesty’s Revenue and Customs (HMRC). The following facts may be of help to those who are new to the self-assessment system:

1. Only certain people are required to carry out self-assessment

People who are in employment or receiving pensions, and who normally pay tax through their tax codes, usually have no need to fill in returns. However, those whose arrangements are not straightforward may be required to carry out self-assessment. People who are self-employed or the directors of companies will typically be required to carry out self-assessment, as will trustees and anyone receiving foreign income.

2. You need to register before you begin self-assessment

Registering with HMRC is essential before you can start the self-assessment process, and you can normally do so online. For those beginning self-employment, the information that will need to be provided includes contact details, a National Insurance number, and a Unique Taxpayer Reference (UTR) number. Those who have not been self-employed before will have a UTR sent to them by HMRC, as well as an Activation Code for the online self-assessment service.

3. Not everyone has to meet the same deadline

Letters are sent out in April and May each year informing you that a tax return is needed. If a letter does not arrive, it is important to inform HMRC because you may be fined if you fail to complete a return in time.

There are different deadlines for completing tax returns depending on the filing method chosen. If you decide to complete a paper tax return, then you will need to send it to HMRC before midnight, 31st October. Those who complete tax returns online have a little longer because the online filing deadline is midnight, January 31st of the following year.

4. Online self-assessment has a number of advantages

Completing tax returns online is beneficial in several ways. Firstly, the deadline is a bit further away, giving you longer to complete the process. Online filing is convenient because you do not have to send anything in the post, and you can take your time completing the form and saving it as you go along before submitting. The system also works out any tax that you owe, or that HMRC owes you, instantly.

5. There are a number of ways to pay the tax owed

If, after completing the self-assessment process, you owe some tax then you can ask HMRC to collect the money through your tax code, if you wish. This is only possible with smaller amounts and for those who are already part of the PAYE system. Direct debit is another payment option and, in some cases, you may be able to set up a Budget Payment Plan, paying in weekly or monthly instalments. Alternatively, you can pay online with a debit or credit card, by CHAPS, or send a cheque in the post. It is also possible to pay your tax bill at the Post Office or by Bank Giro.

Posted by admin
May 23, 2014
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