Your personal circumstances will affect how HM Revenue and Customs calculate and collect income tax on your earnings. For many people in the UK, income tax is calculated based on their salary or pension, and paid over to HMRC on a monthly basis using the ‘Pay as You Earn’ system (PAYE). For individuals with more complicated tax affairs, HMRC requires an annual self assessment tax return to be completed in order to assess the tax liability for the year.
It is the responsibility of the taxpayer to tell HMRC if they believe that they should be completing a self assessment return. Therefore the following is a list of the most common scenarios which will lead to the requirement to complete a tax return:
Self employment
If you are self employed or a member of a partnership, HMRC will require you to complete a tax return for each year until your self employment ceases.
Company directors, Ministers, Lloyd’s names or members
HMRC require individuals in the following positions to complete a tax return each year:
- Company director (except for directors of non-profit organisations, who do not receive any payments or benefits)
- Minister of religion (any faith)
- A name or member of Lloyd's
Trustees
Trustees or personal representatives managing the tax affairs or another individual (including deceased individuals) are required to complete a tax return.
Similarly trustees of certain pension schemes should complete a tax return each year.
Income above a certain level from savings, investments or property
Individuals generating high levels of income from sources other than employment or self employment are also required to declare the income on a self assessment tax return. Such levels of income are:
- £10,000 or more income from savings and investments
- £2,500 or more income from untaxed savings and investments
- £10,000 or more income from property (before deducting allowable expenses)
- £2,500 or more income from property (after deducting allowable expenses)
- 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
Restricted age-related allowances
Individuals aged 65 or older will need to complete a tax return, if they are:
- Receiving age-related personal allowances, and
- Earning over £25,400 per year (in the tax year 2012-13)
(Exceptions apply in some circumstances especially where your tax affairs are simple)
Non-resident or non UK domiciled individuals
As residency is a complex issue, individuals may also need to complete a tax return if they are:
- Not resident in the UK
- Not ordinarily resident in the UK
- Not UK domiciled and are claiming the 'remittance basis'
- Dual resident of the UK and another country
Other circumstances
HMRC also require individuals to complete a tax return if they generate income:
- From overseas (which is liable to UK tax)
- Over £100,000 in a tax year
Employees who want to claim tax relief for expenses or professional subscriptions of £2,500 or more also need to do so by completing a tax return.
Unpaid taxes
Employed individuals who have not paid enough income tax using the PAYE system may need to complete a tax return, if the outstanding amounts cannot be collected through the PAYE code for future years.
Capital Gains Tax becomes liable if you've sold, given away or otherwise disposed of a chargeable asset such as a holiday home or shares. Individuals in this scenario need to complete a tax return and the Capital Gains Tax pages.
If your tax affairs fall into one or more of the above categories and you have questions about registering for self assessment or how to complete your tax return, please contact us to find out how we can help.
