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Introduction -contractor Self Assessment tax return guide
This is the official HMRC Self Assessment tax return form (SA) guide for website members many of whom are UK contractors and visitors. Within this article for contracting professionals, there is some good tax return advice (SA) and it will assist you in completing your contractor Self Assessment, if you submit your SA return yourself. This UK tax Self Assessment guide will help you understand the deadline for filing, what you need to consider, and what to do when you complete your contractor tax return.
The Self Assessment process is in place for individuals who are UK residents and have unpaid tax over the tax year. Through the SA system, and as part of filing a UK tax return, they can pay over any outstanding tax due on their overall taxable income.
The SA system is also now used to:
- Make student loan repayments for those that are not in full-time employment.
- Clawback Child Benefit paid to parents who earn over £50K per annum.
Initial thoughts
SA tax return guide -who has to file a Self Assessment tax return?
As part of this SA tax return guide for UK contracting professionals, let us now consider who has to do a Self Assessment tax return? Most importantly, you have to complete an SA tax return if:
- You are a director in a company.
- You are in self-employment.
- As an individual, you receive income which is not taxed at source during the year. This includes dividends, rental profits, and foreign income.
- As an individual, you may have reliefs on which you can claim tax back. Reliefs include personal pension payments, donations under Gift Aid and investments under Venture Capital Schemes (EIS, SEIS and SITR).
When you complete your SA tax return form, errors must not be made. In addition, you may need to be aware of payments on account if these apply to you.
What is a Self Assessment tax return form -the process, in brief
Most limited company contractors do not have a complex HMRC tax return. Therefore, what is an SA tax return, and how do you complete your Self Assessment? Notably, most professionals with their own contractor limited company and small business owners will have a salary, dividends, and perhaps some personal bank interest. When this is the scenario, your return will not be too complex. However, your contractor tax return will take longer to complete if you have other income such as rental profits, foreign income, investment income, Capital Gains Tax transactions, etc.
If you have a good contractor accountant, they will usually prepare your contractor Self Assessment tax return for you. If they do this, they should also submit your return to HM Revenue & Customs (HMRC) on your behalf. However, you must include all of your taxable income and any reliefs on your contractor tax return.
To sum up, it is good tax return advice and up to you to:
- Ensure that all other details on your return are correct; and
- You submit your return accurately to HMRC.
Other initial thoughts
How to register for a Self Assessment tax return
In this HMRC tax return guide, it is key to know that you must actually register for SA with HMRC before you complete your contractor tax return. If you are a director of your own company, your accountant will usually take care of this process and provide tax return advice when needed.
Once you register, you will receive a Unique Taxpayer Reference (UTR). The reference is two sets of five digits. Please make sure that you keep this in a safe place.
In the future, HMRC will send you a notice to complete a HMRC tax return through the post each year. You usually receive this in April or May, just after the tax year-end on 5 April. If you do not receive this notice but are under the SA system or should be under the SA system, you still need to complete your tax return.
Register to file your HMRC SA tax return form online
We now highlight as part of this Self Assessment tax guide, that most taxpayers file their SA tax returns online via the HMRC website. Therefore, if you plan complete SA yourself, you must register for an online Personal Tax (Self Assessment) account with HMRC. When you register, you must provide your email address and choose a password.
As part of this process, HMRC will send you an activation code through the post. This code will go to your home address and will typically arrive within seven working days. You must activate your account online with HMRC when you receive this. After you have done this, you can then file your return online.
A paper tax return can also be completed and posted to HMRC, although, as mentioned earlier, most file their tax return online nowadays.
Tax return (contractor) -complete your UK contractor Self Assessment tax return online
The process -how to do Self Assessment tax (UK)
As part of this HMRC Self Assessment tax return guide, it is important to be aware that the more sources of income you have will depend on how complicated your personal financial affairs are.
When you complete your SA tax return, there are various sections to fill in:
- Your primary employment gross salary and tax as shown on form P60. If you have your own business and pay yourself a salary, your accountant should have sent form P60 to you. Also, you will need a copy of the form P11D from your employer if you were provided with any Benefits in Kind. If you have any benefits through your own company, your accountant should have sent a copy of form P11D to you in June or July. * As an aside, if you have worked at several different employers in the past and have various pension schemes from former employers dotted around, something that you may be interested in is pension consolidation.
- The pay and tax details that you receive from a second job. Or the details of any income from previous employment. These details show on the end-of-year P60 form or final payslip in the tax year. If this is the first year you are to complete Self Assessment, it could be your salary and tax shown on your P45 form from your previous employer. You will have received a P45 form shortly after leaving your former employer.
- Redundancy lump payment from a former employer.
- Any amounts you receive under Employed Income Support and Universal Credit.
- The details of any income (and expenses) you receive from Self-Employment.
- Any details of income and expenses from any Partnerships.
Further items that may go on to your HMRC SA tax return
- Any income from investments. This will include pensions.
- Dividend income. It will include dividends from your own company. It will also include any other dividends that you may have received.
- If you are a landlord, the details for any property you rent out include the rental income and expenses.
- Any interest that you receive on your bank or building society accounts. This interest does not include any that you receive on ISAs.
- Any foreign income.
- Details of any Capital Gains transactions, including any claims for Entrepreneur’s Relief -a gain or loss on selling a second home, a business or other chargeable assets.
- Child Benefit income -part or all of this will need to be paid back if you or your partner earned over £50,000.
- Any payments to charities under Gift Aid -if you claim tax relief. Claiming for these will only affect your tax bill if your overall gross income is over £50,270.
- Any payments that you make personally to any personal pension schemes. You can claim tax relief on these.
- Relief for investments under Venture Capital Trust schemes –EIS (Enterprise Investment Scheme), SEIS and SITR.
SA tax return guide -including supplementary pages with your tax return
As part of this HMRC Self Assessment tax return guide, there are some specific income or relief items are reported on supplementary pages which are attached to your HMRC tax return. Indeed, these are reported separately as extra details are necessary (the tax return itself is limited to the number of boxes for each type of income). Therefore, these include:
- Additional information (SA101).
- Employment (SA102).
- Self-employment (SA103S or SA103F).
- Partnership (SA104S or SA104F).
- UK property (SA105).
- Foreign income or gains (SA106).
- Trusts etc. (SA107).
- Capital gains (SA108).
Submit your contractor Self Assessment tax return
When you complete your SA return via the HMRC website, this will determine what tax you are due to pay or what refund they owe you. There are different tax rates depending on your level of income, and these are 20% up to £50,270, 40% between £50,271 and £150,000 and 45% above £150,000 in 2022/23. The 45% rate will apply to income over £125,140 in 2023/24.
Alternatively, if you are to submit a paper return, HMRC will usually send you a tax calculation through the post. According to HMRC, `only fill in the short tax return (SA200) if HMRC sends it to you.’
If you have an accountant, they will provide tax return advice and answer any questions you have. They will also usually provide you with backup schedules for the tax return and a copy of your final SA return. They will also submit the tax return to HMRC on your behalf.
Other considerations around UK contractor Self Assessment
Deadlines
When you file your SA return online with the tax office, the HMRC Self Assessment deadline is 31st January, which follows the end of the tax year. This is also the date you need to pay your tax bill. The annual tax bill is also known as the balancing payment, as this is the amount required to pay the balance of tax that you owe for the previous tax year.
Therefore, for the tax year ending 5 April 2023, the tax return deadline, and tax payment deadline is 31 January 2024.
You can still fill in a paper return (SA100) by sending this through the post to HMRC. Basically, in this case, the Self Assessment tax return deadline to complete and file this is 31 October 2023. In addition, this is also the date you need to have paid your tax bill in this scenario.
If you submit tax returns or revised tax returns for past tax years, in some cases, you may need to file this on a paper tax return and send it through the post to HMRC, as the online option is not available.
Payments on account
As part of this tax Self Assessment guide, we now highlight that under the personal tax system, you may need to make `Payments on account’ by 31 January and 31 July each year. Furthermore, these are payments on account of the following year’s tax bill. However, you will not need to make payments on account if:
- You have already paid more than 80% of your tax bill for the tax year. For example, you pay your tax through your tax code on your salary. Alternatively, your bank has already deducted interest from your savings.
- If the first option does not apply, you will not need to make payments on account if your latest SA tax bill is less than £1,000.
Therefore, if you do not satisfy the above two conditions, you will be required to make payments on account of the following year’s tax bill.
UK contractor Self Assessment -paying your SA tax bill by the payment deadline
Within this tax return advice, please remember that SA is one of your limited company contractor taxes. However, this is a personal tax rather than a company tax.
With regards to paying your tax bill, you should ensure HMRC receive any liability in their bank account by the payment deadline. When you make your payment, the reference you quote is your UTR code with a capital `K’ at the end.
If you are due a refund HMRC will make the repayment around two to three weeks after you have submitted your tax return to them.
If you have a liability of £3,000 or less, you can ask HMRC to collect the tax you owe by adjusting your tax code. Please talk to your accountant if this is something that you would like to do.
As part of the tax return advice in this guide, the options available for paying your Self Assessment tax bill are:
- Direct debit.
- Approve a payment through your online bank account.
- Make an online or telephone bank transfer (this is the most popular).
- By debit or corporate credit card online.
- At your bank or building society.
- By cheque through the post.
- Pay weekly or monthly.
- Through your tax code.
There is a fee if you pay by corporate credit card or debit card. In addition, the fee is not refundable. However, there’s no fee if you pay by personal debit card. Furthermore, you cannot pay by personal credit card.
Penalties
If you miss the 31 October or 31 January deadlines, HMRC will automatically charge you a £100 penalty. This penalty is chargeable regardless of why your return was delivered late.
The £100 penalty applies if you are up to three months late after the SA tax return deadline.
You also have until 28 February to pay your tax bill before a 5% penalty on your actual tax bill is also chargeable.
Further to the above, with regards to the tax return deadline, you have 90 days to file your tax return, after which it will cost you £10 a day in fines (up to 90 days -£900).
There are further penalties every six months (£300) and twelve months (a further £300) if you are even later.
Further penalties are payable if you do not pay your tax bills on time. There is also interest too for late when you pay your tax late. This is a good guide from Ross Martin, which explains clearly how the penalties work for SA.
Additional areas to consider
You cannot pay your contractor Self Assessment on time
If you struggle to pay your personal tax bill on time, you should consider contacting HMRC and setting up a Time To Pay arrangement. Before speaking with them, you must think about a realistic plan. Generally, they will agree to a payment plan over 12 months; however, when this is put in place, you must ensure you stick to the plan to avoid further issues later.
If you need to speak to HMRC to set up a plan, you can use the Self Assessment payment helpline. The number is 0300 200 3822, and it’s open from Monday to Friday between 8 am and 4 pm.
How to de-register for Self Assessment tax return
How do you deregister from Self Assessment? Notably, if you have been registered under the Self Assessment tax system, there will come a time in the future when you no longer need to be in the system. As a result, you will need to know how to unregister for Self Assessment. The process here is you will inform HMRC of this and they will de-register you from SA.
A simple phone call can resolve this. When you call, please give them your SA reference or National Insurance number.
You will no longer need to be within in the system if all of your income is taxed at source (salaries) and you have no untaxed income (dividends, rental profits etc.).
Final thoughts
This SA tax return guide covers most aspects and should give you a good insight into how the HMRC SA tax return form system works. There is lots of very useful HMRC Self Assessment tax return advice and if you need to send a tax return to HMRC, you must file this before the deadline. You only need to do your contractor Self Assessment accounting once per year, and It is even better if you can file your SA return soon after the tax year-end. This way you will have knowledge that you are up to date and know that the task will not reappear until the following year.
As you can see, SA is quite a complex area. It is part of your limited company contractor taxes and it is relatively easy to get lost if you are unsure. Hopefully, the tax return advice in this guide has given you a good insight into SA. Finally, if you have any questions or issues on SA, you should check these out with your accountant.
Link to Contractor Advice UK group on
