Do I Need to Register for Self-Assessment? The Most Asked Questions - 2024
One of the most asked questions most UK practice accountants encounter is: "Do I need to register for self-assessment?" This seemingly simple question has a variety of answers depending on the taxpayer's situation, making it one of the most confusing areas for UK residents. With numerous factors at play, such as income thresholds, employment types, and additional sources of income, it's no surprise that self-assessment remains a frequent source of uncertainty.
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1. What Is Self-Assessment?
Self-assessment is HMRC’s method for collecting income tax that has not been automatically deducted through the Pay-As-You-Earn (PAYE) system. If your income comes from other sources, such as self-employment, rental properties, or investments, you need to declare it via self-assessment.
The system requires taxpayers to calculate their own taxable income and expenses and submit this information annually. If you fail to meet deadlines, penalties and interest can accrue quickly, so it's important to know if you're required to file.
2. Who Needs to Register for Self-Assessment in 2024?
Not everyone needs to register for self-assessment, but you must do so if:
- Self-Employed Individuals: If your earnings from self-employment exceed £1,000 annually, you must file a tax return. This is applicable even if your business is small or just starting out.
- PAYE Employees with Additional Income: If you earn over £150,000 from employment via PAYE, or have additional untaxed income, such as dividends or rental property income, you'll need to file a self-assessment.
- High Earners: The threshold for high earners paying tax under PAYE rose to £150,000 starting April 2023. If you earn over this amount, you'll need to file a self-assessment return unless all your income is taxed via PAYE. For those earning less than £150,000, and with no additional income, self-assessment is no longer required.
- High-Income Child Benefit Charge (HICBC): If you or your partner earn more than £50,000 and receive Child Benefit, you're liable for this charge and need to file a return.
3. Key Changes for 2024
Increased Threshold for High Earners
As of April 2023, the self-assessment threshold increased to £150,000, up from £100,000. However, the personal allowance (the amount you can earn tax-free) still begins to reduce once your income exceeds £100,000. For every £2 over this threshold, you lose £1 of the allowance, and it is completely eliminated at £125,140.
Removal of the Threshold from 2024/25
Starting in the 2024/25 tax year, high earners whose income is solely taxed via PAYE will no longer need to file self-assessment returns. This means a reduction in administrative burdens for taxpayers with straightforward income situations.
Digital Record-Keeping
To comply with the new "Making Tax Digital" rules, all self-assessment taxpayers will be required to maintain digital records starting from April 2024. This will simplify the tax filing process and improve accuracy.
Basis Period Reform
HMRC is introducing a reform where self-employed individuals and partnerships must align their accounting period with the tax year (April 6th to April 5th). This will come into effect in 2024, affecting how taxable profits are calculated.
4. When Do You Need to Register?
The deadline to register for self-assessment is 5th October after the end of the tax year in which you first earned untaxed income. For example, if you started earning self-employment income in the 2023/24 tax year, you must register by October 5th, 2024.
5. Filing Deadlines
The deadlines for submitting a self-assessment tax return are as follows:
- Online Submission: January 31st of the following tax year (e.g., January 31st, 2025, for the 2023/24 tax year).
- Paper Submission: October 31st of the same year.
6. What Happens If You Don’t File?
Failing to register for or submit a self-assessment return when required can result in penalties from HMRC. Late registration can incur fines, and failing to file by the deadline leads to an automatic £100 penalty, with additional penalties if the delay extends beyond three months.
7. How to Prepare
To ensure compliance, keep accurate records of your income and expenses throughout the year. Consider consulting an accountant to clarify your filing obligations, especially if you have multiple income streams or complex tax situations.