HMRC’s Self Assessment system collects income tax from individuals who don’t have it automatically deducted from their income. For the vast majority this affects self-employed individuals but there is an array of different income types that will require one to do a Self Assessment tax return.
Income tax is usually automatically deducted from wages, pensions and savings but individuals with income from other sources will need to submit a Self Assessment tax return and pay any tax dues they may owe.
Tax returns must usually incorporate all aspects of the income and HMRC will use it to calculate the amount of Income Tax or potential Capital Gains Tax one owes.
HMRC announced yesterday that the department will be waiving late penalties for Self Assessment tax returns and payments.
This is to help accommodate those who will be unable to submit their return or pay by the usual deadline of January 31.
Self Assessment tax returns submitted before February 28 and tax payments or Time to Pay arrangements made before April 1 will not incur any penalty fees.
However, HMRC noted that 2.75 interest on outstanding payments will still be payable from February 1.
Additionally, paying income tax on normal wages or pension payments whilst receiving a different type of untaxed income does not mean one can avoid a Self Assessment tax return or payment.
Self Assessment tax returns can also be submitted in some cases to prove self-employment or receive benefits.
Those who receive Child Benefit may also need to submit a return.
This is only necessary if they or their partner earned over £50,000 in the last financial year as they will need to pay the High Income Child Benefit Charge.
Anyone who is submitting a Self Assessment tax return for the first time is advised to account for 20 days in order to register before they are able to submit the return.
Self Assessment tax returns can be filled out online or in paper form and there is assistance available for those who need it.