top of page

Self assessment Tax Return

Self assessment Tax Return

Completing a Self-Assessment TAX Return


Every individual who has sources of income that have not been taxed under PAYE (Pay as You Earn) must declare their income to HM Revenue & Customs (HMRC) annually by completing a self-assessment tax return. This applies to individuals including the self-employed, partners in a business partnership, individuals with investment or rental income and company directors.


This factsheet explains the business records that must be kept by self-employed people in order to complete a tax return and covers how to complete and submit the return. The deadlines for submitting returns and paying tax, the penalties for missing deadlines, and how to correct a tax return and appeal against a tax decision are also explained.


Business records of sole traders and partnerships:


In order to complete their tax returns, sole traders and individuals within partnerships must keep full and accurate records of all business sales, income and expenses, as well as details of personal income such as interest on investments. If their business is VAT-registered they must also keep VAT records that relate to each tax year, and if they have employees, they must keep PAYE records. The ways in which figures are recorded and included on a tax return for a particular year vary according to the accounting method used. Sole traders and partnerships can use one of two accounting methods: the traditional accounting method and the cash-basis accounting method.


Traditional accounting method:


Under this method, income and expenses are recorded by the date the customer was invoiced or the date on a bill for an item of expenditure incurred. For example, if a customer is invoiced for work on 30 March 2020, the invoice is recorded in the 2019/2020 tax year even if the bill is not paid by the customer until 30 April 2020 (after the end of the tax year on 5 April).


Cash-basis accounting method:


Most small businesses with a turnover of less than £150,000 can use this method. This means that income and expenses are only recorded when a bill is paid or income is received. For example, if a customer is invoiced for work on 30 March 2020 and the bill is paid on 30 April 2020, the invoice would be recorded in the 2020/21 tax year as the bill was paid after the end of the tax year on 5 April. Once a sole trader or partnership has opted to use cash-basis accounting, they cannot revert to the traditional method.


Taxpayers do not need to send records to HMRC with their tax returns, but they must keep their records as proof of the amounts claimed in case HMRC wishes to check them. The types of documentary evidence that must be kept include all invoices and receipts for sales made and goods or stock purchased, cheque book stubs, bank statements, till rolls and bank slips.


Anyone using the traditional accounting method also needs to keep further evidence. This can include:


  • Details of any sums that are owed either to them, or by them, but have not yet been received or paid.

  • The value of stock and work in progress.

  • The amount of money taken out of the business during the year for personal use.

  • How much has been invested in the business during the year.

  • The year-end bank balances.

Anyone using cash-basis accounting can choose to record income and expenses by the date the money entered or left their account or, for example, by the date on a cheque. However, they must use the same method every year.


If records have been lost, stolen or destroyed, HMRC requires sole traders and partnerships to provide estimates of income and expenses in their tax return and to inform them if estimated figures have been included.


Records must be kept for five years after 31 January following the end of the tax year concerned. For example, records for the tax year 6 April 2019 to 5 April 2020 must be kept for five years from 31 January 2021, which means until January 2026.


Completing and sending a tax return and filing deadlines:

The self-assessment tax return includes a number of different pages that might need to be completed depending on an individual’s circumstances. The main tax return is known as form SA100, but additional supplementary pages might need to be completed depending on the type of income that has to be declared. For example, form SA103S is used to declare income from self-employment; further supplementary pages must be completed to declare PAYE income, income from UK property, foreign income or capital gains made. For more information about self-assessment forms and to view help sheets that should be read before completing a tax return, go to www.gov.uk/selfassessment-forms-and-helpsheets.


Some individuals with simple financial circumstances whose income is less than the mandatory VAT registration threshold can complete a short tax return (form SA200). However, company directors, anyone with more than one self-employed business, and anyone who wishes to offset business losses against non-business income or a previous year’s tax charges must complete the main tax return, SA100. For more information about short tax returns, go to www.gov.uk/government/ publications/self-assessment-short-tax-returnnotes-sa210.


Tax returns can be completed and submitted to HMRC online, by post or by using specialist software approved by HMRC (that must be purchased from a third-party supplier).


The deadline for submitting tax returns using HMRC’s free online service is 31 January following the end of the tax year to which the return relates. For example, online tax returns for the tax year 6 April 2019 to 5 April 2020 must be filed by 31 January 2021.


The deadline for sending in a paper tax return is 31 October following the end of the tax year to which the return relates. For example, paper returns for the tax year 6 April 2019 to 5 April 2020 must be filed by 31 October 2020.


Go to www.gov.uk/government/publications/ self-assessment-commercial-software-suppliers for more information about the types of specialist third-party software that can be used to submit a tax return.

More information about sending tax returns is available at www.gov.uk/self-assessment-taxreturns/sending-return.


The tax bill and payment deadlines Anyone who completes their tax return online can view their tax calculation or bill as soon as the return has been completed. However, HMRC will send a paper bill to anyone who submits a paper return. For more information about tax self-assessment bills, go to www.gov.uk/ understand-self-assessment-bill.

Sole traders and partners in their first year of trading who make taxable profits usually have to pay any tax and Class 4 National Insurance contributions (NICs) due in arrears, calculated from the date of start up to the end of the first tax year. This must be paid by 31 January following the end of that tax year. For example, anyone starting to trade in July 2019 would be required to pay any tax and NICs due for the 2019/20 tax year by 31 January 2021, around 18 months after starting trading.


After the first year of business, in addition to paying the tax due for the tax year that has ended, the taxpayer will need to make payments in advance to cover the tax due for the current tax year. (This applies unless the previous self-assessment tax bill was for less than £1,000, or 80% of the tax due has already been paid, for example through PAYE.)

These advance payments are known as ‘payments on account’ and are usually paid in two equal instalments, each of which is half of the previous year’s tax bill. The first payment on account is due by 31 January.


The second payment on account is normally due by 31 July. However, because of the impact of the coronavirus outbreak, in May 2020 HMRC granted taxpayers an option to defer their second payment on account for the 2019/20 tax year. Taxpayers who make use of this option to defer will not be charged interest or face any late payment penalties provided that they make their second payment on account on or before 31 January 2021.


For information about deferring a self-assessment payment on account due to coronavirus, go to www.gov.uk/guidance/defer-your-selfassessment-payment-on-account-due-tocoronavirus-covid-19.


If the profits made in the second year’s trading are higher than those in the first year, a further payment known as a ‘balancing payment’ may be required. This has to be paid by the 31 January following the end of the second year’s trading.


However, if the profits in any year are lower than in the previous year, an application can be made to HMRC to reduce the payments on account. A refund will be made if the payments already made on account are higher than the total tax actually due for the year.

Go to www.gov.uk/understand-self-assessment-bill/ payments-on-account for more information about payments on account and balancing payments, and for an example of how they are calculated.


Tax payment methods and problems with paying tax:


Tax due under self-assessment can be paid in a wide variety of ways, such as online, at a bank or building society, by a cheque posted to HMRC, through a PAYE tax code, or by way of a budget payment plan that enables regular amounts to be paid in advance. Go to www.gov.uk/pay-selfassessment-tax-bill for more information about payment methods.


Anyone who is unable to pay their tax bill may be able to apply for an extension of time or be allowed to pay the bill in instalments. It is important to contact HMRC immediately if a payment that is due cannot be made, if the amount due is disputed, or if a payment deadline is missed, as this may avoid penalties. Go to www.gov.uk/difficulties-paying-hmrc for more information about how to deal with problems with paying tax on time.


Penalties for missing deadlines:


If tax is not paid on time, HMRC may charge interest, together with a penalty or surcharge. HMRC will take enforcement action against anyone who does not pay tax that is due, and this can include collecting what is owed through other earnings or a pension, instructing a debt collection agency to recover the tax, taking the taxpayer’s property and selling it, taking money directly from the taxpayer’s bank account, taking court or bankruptcy proceedings, or closing a business down.

HMRC provides a calculator for estimating penalties for late submission of tax returns or late payment of tax due at www.gov.uk/estimateself-assessment-penalties.


Correcting a tax return following submission and claiming a refund:


Corrections can be made to self-assessment tax returns that have been submitted. Any corrections to the return for the tax year 6 April 2017 to 5 April 2018 must be made by 31 January 2020. Returns made online can be corrected online but returns made on paper forms can only be corrected by completing new forms, marking each page with the word ‘amendment’. A taxpayer who filed their return using third-party software should contact the software provider to check how amendments can be made.


When a correction is made online, HMRC will calculate the amount of tax overpaid or underpaid within three days. If a refund is due, a request for repayment should be made online.


When corrections are made on paper, HMRC will send an updated bill within 4 weeks. They will pay any refund directly into the taxpayer’s bank account if bank details were provided on the tax return. If more tax is due the next payments on account will be amended to reflect this.

Anyone who misses the deadline for submitting corrections can still write to HMRC to explain the required corrections but must contact them within four years of the end of the tax year that the corrections relate to in order to claim a refund for overpayment.


Appealing against a tax bill or decision:


Anyone who disagrees with their tax bill or tax decision should contact HMRC and may be able to appeal against the bill or decision. HMRC will write to the taxpayer and confirm whether or not they can appeal, and usually allows them 30 days in which to do so. Payment of the tax or penalties involved can usually be delayed until the appeal has been resolved.


Penalties imposed will usually be cancelled or amended on appeal if the taxpayer has a reasonable excuse. This is generally something that was unexpected or outside their control and which prevented them from meeting their obligations.


Hints and tips:


  • Keep records up to date so that it is possible to predict and plan for tax liabilities in advance.

  • Be aware of deadlines for filing returns and paying tax to avoid penalties.

  • Make self-assessment easier by getting accounts prepared as soon as possible after the year end.

  • Always check payments on account to see if they need to be reduced if profits or other income have fallen.

  • Some self-employed people can choose to join the Making Tax Digital pilot for income tax. This involves using HMRC-approved software to keep business records digitally and send quarterly income tax updates to HMRC, instead of completing an annual self-assessment tax return. For more information, go to https://www.gov.uk/guidance/sign-upyour-business-for-making-tax-digital-forincome-tax.

Further information:

Help and Support for Self-assessment (videos and webinars)

HMRC Website: www.gov.uk/guidance/help-and-supportfor-self-assessment


Useful contacts:

HM Revenue & Customs (HMRC) is the government department responsible for the collection of tax. It also provides information and advice.

Tel: 0300 200 3310 (Self-assessment helpline)

Website: www.gov.uk/government/ organisations/hm-revenue-customs

The HMRC COVID-19 helpline provides help for businesses and self-employed people in financial distress and with outstanding tax liabilities to receive support with their tax affairs.

Tel: 0800 024 1222

TaxAid is a charity that provides free tax advice to people on low incomes when they get into difficulties with their tax affairs.

Tel: 0345 120 3779

Website: https://taxaid.org.uk


DISCLAIMER: While all reasonable efforts have been made, the publisher Acorn HR Services makes no warranties that this information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate.

bottom of page