Think tax returns are only for business owners? Think again.
Self-employed people are probably the first people you think of when you hear "Self Assessment", but there are a number of other situations where you may need to complete a tax return.
And one of the biggest problems is that you don't always know you need to file one until HMRC gets in touch.
Here are seven situations worth checking.
1. Get a Clear Grip on Cashflow
Cash is still king. Even profitable businesses can run into trouble if cashflow dries up.
Regularly review when money is coming in and going out
Forecast at least three months ahead
Set aside a buffer for unexpected expenses
With cloud accounting tools, you can track cashflow in real-time, avoiding nasty surprises.
1. You're self-employed
If you're a sole trader and your gross trading income is more than £1,000 in a tax year, you will generally need to register for Self Assessment and complete a tax return.
This applies whether your business is your main source of income or something you do alongside employment.
Even if your business made very little profit, you may still have reporting responsibilities.
If you're starting a new business or earning money from a side hustle, it's worth checking your position early rather than waiting until the deadline approaches.
2. You receive income from property
If you rent out a property, you may need to declare the rental income to HMRC.
This can include income from:
A buy-to-let property
A second home
A property you rent out for part of the year
Certain holiday lets
A room or rooms in your home
There are specific rules around allowable expenses and property income, so don't assume that the amount you receive in rent is the amount you'll pay tax on.
3. You have a high income
If your income is high enough, you may have a Self Assessment obligation even if you're employed and your employer already deducts tax through PAYE.
This can catch people out because they assume their tax has already been dealt with through their payslip.
If your income has increased significantly, it's worth checking whether you need to complete a tax return.
4. You receive dividends
If you receive dividends from shares or from your own limited company, you may need to report them on a tax return.
There is a dividend allowance, but dividends above the relevant allowance can be taxable.
And remember — dividends from your own limited company are not the same as taking a salary. They have different tax rules and need to be treated correctly.
5. You have income from savings or investments
Interest from savings, dividends from investments and other investment income can sometimes create a tax liability.
Whether you need to complete a tax return will depend on your circumstances and the amount and type of income you receive.
With interest rates and savings balances changing, it's worth keeping an eye on your total income rather than assuming your bank or investment provider has dealt with everything for you.
6. You've sold an asset and made a gain
Selling certain assets for more than you paid for them can create a Capital Gains Tax liability.
This could potentially include things such as:
A second property
Shares or investments
Business assets
Other valuable assets
There are exemptions and allowances, and the rules can be complicated, so if you've sold an asset and made a significant gain, it's worth getting advice rather than assuming there's nothing to report.
7. HMRC has asked you to complete one
This might sound obvious, but it's important.
If HMRC sends you a notice telling you to complete a Self Assessment tax return, you shouldn't simply ignore it because you don't think you owe any tax.
There may be a reason HMRC believes you need to file.
If your circumstances have changed and you think you no longer need to complete a tax return, you should check with HMRC or your accountant rather than simply missing the deadline.
What if I'm not sure?
This is where things can get confusing.
You might have several different sources of income — for example, a salary, a small side business, savings interest and dividends.
Just because tax is already being deducted from one source doesn't necessarily mean your overall tax position has been dealt with.
If you're unsure, check.
It is much better to find out that you don't need to file a return than to discover after the deadline that you should have done.
Don't forget the deadlines
If you do need to complete a Self Assessment tax return, there are deadlines for registering, submitting your return and paying any tax due.
For most online Self Assessment returns for the tax year ending 5 April, the deadline for filing and paying is 31 January following the end of the tax year.
There can also be an additional payment on account due depending on your circumstances.
So don't leave it until January to start thinking about it.
Not sure whether you need to complete a tax return?
You're certainly not alone.
Tax rules can be confusing, particularly when your income doesn't fit neatly into one category.
At Soldi Partners, we help individuals and small business owners understand their tax responsibilities without the jargon.
If you're unsure whether you need to complete a tax return, get in touch and we'll help you understand what applies to you.
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