Despite what some people may believe there is a wide range of reasons other than being self employed that may cause HMRC to ask you to complete a self assessment tax return. The most common are self employment, owning a rental property or being a director of a limited company. Below are some of the other reasons that you may not have thought of. It is important to know if you fall into one of the categories, even if you are a full time PAYE employee, you are required to complete a return and you could be risking a fine if you fail to complete one.
1. YOU HAVE A ‘SIDE HUSTLE’ OR SMALL BUSINESS
There is an allowance of £1,000 per tax year that you can earn through casual earnings or trading that is tax free. This can be babysitting, selling online, tutoring or anything else you do that you get paid for. if you earn over £1,000 a tax year from such activities you will be required to complete a tax return.
2. YOU EARN OVER £100,000 A YEAR
Anyone earning over £100,000 a year will likely be required to complete a self assessment tax return.
3. YOU MAKE MONEY OUTSIDE OF THE UK
If you are a tax resident in the UK all income you make, whether from the UK or overseas is liable for UK tax. therefore if you have money from a job overseas, rental income or foreign based investments you will likely need to provide details of these on a self assessment tax return.
4. YOU OR YOUR PARTNER CLAIM CHILD BENEFITS
If you or your partner claims child benefit and one of your earns over £50,000 (after deducting pension contributions and gift aid donations) you will need to complete a tax return. This is because the amount of benefit reduces on a scale between £50k and £60k and there may be money due back to HMRC. It is the responsibility of the higher earner to complete the tax return even if they do not receive the child benefit. And remember it is on individual earnings over £50,000, so if you both earn £49,000 then you will be clear of this.
5. YOU HAVE A LODGER
If you let out space in your home to a lodger or as a bed and breakfast, and earn over £7,500 from doing so you will need to complete a tax return. Amounts earned up to £7,500 are tax free thanks to the ‘Rent a room scheme’. If you earn under this amount you do not need to report anything to HMRC.
6. YOU WANT TO CLAIM HIGHER RATE RELIEF ON YOUR PENSION
Pension relief is automatically given at 20%, however if you are a higher rate tax payer and make pension contributions you are entitled to relief at 40% or 45%, depending on your top tax band. A tax return is one way of reclaiming the amount of relief that you are owed. This is most likely to be necessary for personal contributions to a personal pension scheme. Often if you are paying in to a company pension scheme the relief comes automatically through payroll.
7. YOU MADE CAPITAL LOSSES
If you have sold an asset and made a loss for Capital Gains purposes you should complete a tax return. This allows you to carry forward losses made in to future years to offset against any possible gains. You have to offset losses in the current year first and you must inform HMRC of the losses to be carried forward by completing a tax return.
8. HMRC SAY YOU NEED TO FILE ONE
Sometimes HMRC will send letters asking for individuals to complete a tax return. If you receive a letter from them do not panic! Collect all your payslips and year end information and this should provide you with all the information you need. If in doubt, get in touch with an accountant for help. You can book in a call with us using the link at the top of the page.