Self-Assessment Tax Returns (SATR)
Written by Sally Fletcher for plan.it, October 22nd 2010, updated October 14th 2011
Who needs to file a Self-Assessment tax return?
Anyone who receives income, both earned and unearned income such as dividends, that was not subject to full tax at source (such as under PAYE) will have to file a tax return. The following people have to file one regardless of this:
- A Director of a limited company (except for not for profit businesses)
- A Self-Employed person
- A member of a Partnership
- A Trustee
- Anyone receiving foreign income who is a UK tax resident
- Any minister of any faith
- Anyone receiving income from a trust
- Anyone receiving income from a deceased estate where further tax is due
- Members or 'Names' of Lloyds
- A person receiving rental income from property (if paid PAYE and rental income is less than £2500 per annum, it may not be necessary)
- A person who is deceased and has filed returns in previous years will need to have a tax return filed by a representative
As a rule of thumb, anyone receiving income that is NOT taxed at source will be required to file a personal tax return. Anyone who needs to file a return but has not received one must request the form from their tax office.
People who have received additional money by way of selling shares, a large inheritance, selling a second property may also be subject to capital gains tax and will have to file a tax return.
Any person earning over £100,000 under PAYE also has to file a SATR.
SATR's are usually sent out by HM Customs and Excise in April following the end of the tax year. If you do not receive one and you are a Director you must phone your local tax office to request a unique tax reference (UTR) to file on-line. As the taxpayer and Director, the liability falls on you to file a return.
Once you have a UTR you can apply to file on the Government Gateway as an ‘Individual'. You will receive a code in the post within 7 days to activate the service.
How to file
On-line filing is simpler, a guaranteed way of ensuring HMRC have received it; and the filing deadline is extended to 31stJanuary following the end of the tax year. If you want owed tax (under £2,000) to be collected by your tax code the deadline to file on-line is 31st December.
Completed paper versions have a filing deadline of 31st October following the end of the tax year. Returns or the request for you to file a return received on or after 31st July must be filed within 3 months of the date of notification to file a tax return.
HMRC will calculate any tax that is owed and will advise you of payments to be made by 31st January. Any tax owed under £2,000 will be collected by amending your tax code.
plan.it Self-Assessment Service
Many contractors prefer to have the reassurance that their tax return is correctly completed and filed by professionals. We are able to prepare and file your SATR on your behalf. The fee for a basic return is £175 +VAT. If you have more complex tax affairs, please contact us for a quotation on 020 7251 8690.
Understanding your Tax Bill
Any balancing payment that you owe from the previous year will be added to your tax statement.
For the Tax year 2010-11 your tax bill was £6,000. You have made payments of £3,000. The balancing payment of £3,000 is due for payment on January 31st 2012. If there had been any unpaid tax from the previous year/s, this would be added and would include any interest and penalties.
Payments on Account
Tax due to be paid under £1,000 will not have to be paid on account; a single payment will be due on 31st January 2012 for the tax year 2010/11.
If it is over this amount, it will be spread over two payments.
For the tax year 2010-11(6 April 2010 to 5 April 2011) the first payment on account will be due on 31 January 2011. The second payment on account will be due on 31 July 2011.
When your tax return for 2010-11is filed on 31st January 2012, any payments on account are deducted from tax due in that year.
Where no payments on account have been made, the whole amount is due for payment on 31st January 2012.
Application to reduce Payments on Account
If you have received a tax bill with payments on account and you think that your income and tax due for the next year will be less, you can apply to have the payments on account reduced. If you use on-line filing you can make an application on the Government Gateway. If you do not then you need to complete form SA303 and send to HMRC. If it is found that later you owed more tax than you have paid on account, interest will be chargeable and penalties may be applied.
Penalties and Interest
An instant £100 penalty is due for late filing. Where there may be a genuine delay and you can prove the reason why, then HMRC may waive the penalty. It's important to keep a screen shot or print out of any error codes when filing on-line as these will count as evidence.
Any balancing payments for the previous year that have not been paid by 31st January will be charged a daily interest rate (applicable January 2009) plus an automatic 5% surcharge. If this still has not been paid by the second payment date of 31st July a further 5% surcharge will be added.
Where a self-assessment return is filed after the deadline an automatic surcharge will be charged of £100. If you leave filing your return until 31st January 2012 and should have paid tax by that date you will get an automatic 5% surcharge after 30 days and daily interest will begin immediately.
This brief is for guidance purposes only. In all cases we would recommend that you discuss any queries with professional advisors. plan.it Services is a firm of Chartered Accountants regulated by the Institute of Chartered Accountants in England and Wales. Please feel free to contact us if you have any questions relating to this article or other accounting issues affecting contractors.