Busting the self-assessment myths

There are plenty of myths around self-assessment and who needs to file a tax return before the January 31, 2025 deadline.

Here’s some information, courtesy of HMRC, released to help debunk some of the most common ones.

Myth 1: ‘HMRC hasn’t been in touch, so I don’t need to file a tax return.”’

Reality: It is the individual’s responsibility to determine if they need to complete a tax return for the 2023 to 2024 tax year. There are many reasons why someone might need to register for self assessment and file a return, including if they:

• are newly self-employed and have earned gross income over £1,000
• earned below £1,000 and wish to pay Class 2 National Insurance Contributions voluntarily to protect their entitlement to State Pension and certain benefits
• are a new partner in a business partnership
• have received any untaxed income over £2,500
• receive Child Benefit payments and need to pay the High Income Child Benefit Charge because they or their partner earned more than £50,000

Anyone who is unsure if they need to file a return can use the free online tool on GOV.UK to check.
Once registered, they will receive their Unique Taxpayer Reference, which they will need when completing their return and paying any tax that may be due. People will have to reactivate their account if they have registered for self assessment previously but did not send a tax return last year.

Myth 2: ‘I have to pay the tax at the same time as filing my return.’

Reality: False. Even if someone files their return today, the deadline for customers to pay any tax owed for the 2023 to 2024 tax year is January 31, 2025. People may also be able to set up a Budget Payment Plan to help spread the cost of their next self assessment tax bill, by making weekly or monthly direct debit payments towards it in advance.

Myth 3: ‘I don’t owe any tax, so I don’t need to file a return.’

Reality: Even if a customer does not owe tax, they may still need to file a return to claim a tax refund, claim tax relief on business expenses, charitable donations, pension contributions, or to pay voluntary Class 2 National Insurance Contributions to protect their entitlement to certain benefits and the state pension.

Myth 4: ‘HMRC will take me out of self assessment if I no longer need to file a return.’

Reality: It is important that people tell HMRC if they have either stopped being self-employed or they don’t need to fill in a return, particularly if they have received a notice to file. If not, HMRC will keep writing to them to remind them to file their return and may charge a penalty.

People may not need to complete a tax return if they have stopped renting out property, no longer need to pay the High Income Child Benefit Charge, or their income has dropped below the £150,000 threshold and they have no other reason to complete a tax return.

If you think you no longer need to complete a tax return for the 2023 to 2024 tax year, you should tell HMRC online as soon as your circumstances change. Watch HMRC’s YouTube videos on stopping self assessment as a guide to help through the process.

Myth 5: ‘HMRC has launched a crackdown on people selling their possessions online and now I will have to file a return and pay tax on the items I sold after clearing out the attic.’

Reality: Despite speculation online earlier this year, tax rules have not changed in this area. If someone has sold old clothes, books, CDs and other personal items through online marketplaces, they do not need to file a self assessment and pay Income Tax on the sales. HMRC’s guidance on selling online and paying taxes can be found on GOV.UK.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We want to make sure you are clear about your tax responsibilities. These myth busters and our range of resources on GOV.UK can help if you are unsure if self assessment applies to you or think you no longer need to file a tax return.

HMRC urges people to file their return early to provide peace of mind and to also allow time to consider opportunities to spread the cost of their tax bill, claim refunds earlier and avoid costly errors caused by rushing.

People need to keep records to fill in their tax return correctly and they may be asked for documents if HMRC checks their return.

Penalties may be issued if records are not accurate, complete and readable. Self-employed workers must also keep records for their business income, outgoings and make sure they are registered with HMRC as self-employed. Again, more information can be found on GOV.UK.

Anyone who needs to complete a self-assessment tax return for the first time to cover the 2023 to 2024 tax year, should tell HM Revenue and Customs (HMRC) by October 5.

• Please contact me on 01772 430000 to discuss any issues raised by this article or any issues relating to tax matters