10 Reasons Why You May Need to Submit A Self-Assessment Return

Over 11 million people are required to file tax returns each year, however HMRC do not know the exact amount of people that do not submit a tax return but are required to. Here are some of the reasons why you may be required to submit a tax return.

Over 11 million people are required to file tax returns each year, however HMRC do not know the exact amount of people that do not submit a tax return but are required to. Here are some of the reasons why you may need to submit a tax return.

  • If you run a ‘Side-Hustle’ – It is becoming more and more popular now to earn extra income to cover household bills, or just simply for some extra cash, these can include:
    1. Making and selling cakes
    2. Tutoring
    3. Babysitting
    4. Delivery driver

But did you know that income (from most of the above list) is required to be declared on a self-assessment return? If you receive in excess of £1,000 from any source, similar to the above list, you are required to register for self-assessment and report your income to HMRC on an annual basis.

  • A lesser known reason for submitting a self-assessment return, is if you earn more than £100,000 per year via an employment source. Many do not realise that if you earn over £100,000 gross income through employment, that you must submit a tax return. Many do not consider that as you exceed the £100,000 barrier, your personal allowance decreases for every £2 you earn over this threshold. Let’s use the tax year 19/20 as an example; if you earned £110,000 gross salary through employment, your personal allowance would decrease by an amount of £5,000 meaning you could have paid too-little tax in the year.
  • Claiming higher rate tax relief on pension contributions – Basic rate tax payers automatically receive relief on their pension contributions at a rate of 20 per cent, however, if you pay tax at a rate of 40 per cent, you are entitled to an additional 20 per cent relief on all contributions made (an additional 25 per cent if you fall into the additional rate of tax of 45%). Preparing and submitting a tax return can highlight this for you, and, will calculate the relevant adjustment needed to the tax you are paying.
  • High Income Child Benefit – if you or your partner receives an annual income of over £50,000 and receive child benefit, you must submit a tax return each year. The reason being that HMRC operate a claw back of child benefit paid to parents/carers where their income exceeds the threshold of £50,000.
  • Renting a room in your home – The government offer a scheme where you can earn up to £7,500 per year (this figure can change) tax free from letting our part or part of your home. If your income is under this threshold, then no return is due to be submitted, but if your income is over this threshold, a return must be submitted to HMRC to report this income source.
  • You have made capital losses – We all know that you are taxed on capital gains, however, not many people realise you can offset future gains against any losses you have made. If you have made any capital losses, you must submit a tax return to report the loss to HMRC, this loss is then kept on file until which time you make gains of which you wish to offset.
  • You have sold a chargeable asset i.e. a house – you must pay tax on any capital gain when you sell assets such as a house or shares for a considerable amount of money. Each person receives a tax-free threshold each year, this amounted to £11,700 for the tax year 19/20.
  • You have injected money into a venture capital scheme – the government offers tax relief to people who put cash into venture capital schemes. An example of these schemes is the Enterprise Investment Scheme which encourages people to invest in start-up companies and social enterprises which are not list on any stock exchange. If any investment is made in a qualifying scheme, you will be entitled to tax relief, which can be reported on a tax return.
  • Money earned outside the UK – this area can be tricky to navigate! But, in most cases, if you earn money overseas, you will often be required to submit a tax return to HMRC, unless of course the earnings are tax-free.
  • Finally, we have saved the best to last…… because HMRC say so! – Occasionally, HMRC may send you a letter informing you that you will have to submit a tax return. This can sometimes seem a little out of the blue, but HMRC do hold authority to ask for a tax return to be submitted where they feel necessary. The best advice we can offer here, is to stay calm and do not panic! HMRC do sometimes request a return to be submitted to ensure that their records are up to date and to ensure that no income sources are being missed for tax purposes.