Self Assessment: Understand the Basics

 

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Who must send a tax return?

You must send a tax return if, in the last tax year (6 April to 5 April), you were:

  • self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)

  • a partner in a business partnership

You will not usually need to send a return if your only income is from your wages or pension. But you may need to send one if you have any other untaxed income, such as:

  • money from renting out a property

  • tips and commission

  • income from savings, investments and dividends

  • foreign income

Deadlines

HM Revenue and Customs (HMRC) must receive your tax return & any money you owe by the deadline.

The last tax year started on 6 April 2019 and ended on 5 April 2020. On-line tax returns must be submitted & any outstanding tax paid by midnight 31st January 2021. 

Payments on account
Payments on account are advance payments towards your tax bill (including Class 4 National Insurance, if you’re self-employed).

You have to make 2 payments on account every year unless:

  • your last Self Assessment tax bill was less than £1,000

  • you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings

Each payment is half your previous year’s tax bill. Payments are usually due by midnight on 31 January and 31 July.

 

Tip: Working at home?

Has your employer asked you to work at home, even for just one day during the pandemic?  If so, then you are likely to be eligible for tax relief, saving you up to £140 per year!


If your employer requires you to work from home, you've always been able to claim for increased costs, eg, heat or electricity, for the specific time at home. Yet during the 2020 lockdown, HMRC launched a 'microservice' which, even if you only needed to work from home for a day, allowed you to get a whole year's tax relief. That now applies for the new 2021/22 tax year too – meaning many are due two years' relief, worth up to £280. For most people this is simple to do (do note there's a separate route if you do self-assessment via a form).


To claim the tax relief you must have, and declare that you have had, specific extra costs due to working from home. Yet apportioning extra costs, such as heating & electricity, is tough. Due to that, there is essentially a flat rate of £6 a week available to you. There are two ways to do this:

 

  • Employers can pay you £6 a week extra tax-free. Employers can give you an allowance up to this amount and what they give you is free from tax, so you get it all (to give you more, it will need to make special arrangements). 

  • But with many firms struggling, they aren't doing this (& they don't have to), so instead you can claim tax relief on £6 a week. If your employer won't pay expenses for your extra costs due to necessary working from home, but you have them, you can ask for the amount to be deducted from your taxable income. To make the process easy, HMRC says that for claims in line with the employers' payment (i.e. £6 a week), you won't need to justify that figure – meaning you won't need to keep receipts or provide information.

Tax relief of £6 a week equates to a gain of…

  • £1.20 a week for a basic 20% rate taxpayer (£62.40 a year)

  • £2.40 a week for a higher 40% rate taxpayer (£124.80 a year)

  • £2.70 a week for a top 45% rate taxpayer (£140.40 a year)


What if you've more than £6/week increased costs? If you believe you have higher costs, you can claim more, but you will need evidence of the cost increases and must be able to apportion these extra costs specifically to the fact you are working from home – a much more laborious process.
 

How to claim two years' relief (or an extra one if you've already claimed)
At the start of the new tax year, on 6 April 2021, HMRC confirmed the same situation will apply. To process claims, most employees can use the HMRC working-from-home microservice (though this doesn’t apply if you do self-assessment via a form). This will require you to have a Government Gateway ID. If you don't have one, you can set one up along the way.

 

Required to work from home at any point from 6 April 2021 (up to 5 April 2022)? If so & you have higher costs due to it, you can claim via the microservice too. If also claiming for the last tax year (2020/21), you can do both at once. 
 

Self-Assessment

If you do self-assessment via a form, you can't use the microservice – but are due the year's relief. Those who are employed but do their tax via self-assessment each year, can claim the allowance when filling in their self-assessment form:

 

  • Online returns: Fill in the box titled 'Other expenses and capital allowances' in the employment section.

  • Paper returns: It's included in section 20 on the full return and section 2.5 on the short form.

 

HMRC has confirmed that for the 2020/21 & 2021/22 tax years, when you fill in the form you will be able to claim for the entire years automatically, in the same way as those using the microservice. 

For further information & see if you are eligible to claim go to:

www.gov.uk/tax-relief-for-employees/working-at-home