Self Assessment – Why, When and How?


If you earn money, you will have to consider paying tax on it. Earnings are taxable in theory whether they’re £1 or £100,000.

You’re allowed a certain amount tax free, according to your Personal Allowance*.

There are also some exceptions, if you just make small amounts from a hobby, or win prize money.
So, depending on how much you earn, you may not actually have to pay anything – but the principle is always there that your income is TAXABLE.

Most people earn through an employer, who will add you to their payroll and calculate and pay any tax due on your behalf. Then they’ll pay you the remaining balance. This is how the PAYE system works and it ensures you pay the right tax, and on time.

However, if you’re not on anyone’s payroll, or maybe you’re running your own business, then you are classified as self-employed (a sole trader), and YOU are the person responsible for reporting the income and any tax due. Reporting is done through a Self Assessment Return (SAR) which is filed once a year at HM Revenue and Customs (HMRC).

So, it’s up to you to:

  • Keep a record of everything you earn
  • Keep a record of any expenses you can claim against these earnings
  • Register yourself with HMRC as a person receiving self-employment earnings, as soon as you can after starting to earn money (except for ** below)
  • Complete an annual SAR (except for ** below)
  • Pay any tax due direct to HMRC.

NOTE: You can be both an employee and a self-employed person at any time.


This can be done online or by calling HMRC

Annual SAR
This can be done online, and must be completed by 31 Jan after the end of the tax year.
A tax year runs from 6 April to 5 April. So the current year is 6 April 2018 to 5 April 2019. A tax return can be filed at any time after 5 April 2019, but the deadline will be 31 Jan 2020.
If you earn any income within that tax year, regardless of when you start, or if it’s only for some of that period, you will need to register and complete an SAR.

Tax payment

The two taxes you essentially have to consider are Income Tax and National Insurance.

You can earn £11,850 in this tax year without having to pay any Income Tax at all.

You can earn £162 a week (£702 a month) without having to pay any National Insurance.

If you DO have to pay some tax:
After you file your SAR online HMRC will calculate how much you owe. You then have until the 31 Jan after the end of the tax year to pay this.

If you miss the deadline, they start charging interest on what’s due.

If your tax is more than around £2,000 they will also charge you advance instalments on an estimate of the tax for the year ahead: 50% in the same Jan, the other 50% in the July following the end of the tax year.

Then when the NEXT 31 Jan comes around, when they get your actual results, they’ll balance any tax liability against the instalments you’ve already paid, and you’ll either get a refund or have a balance to pay.


**BUT if it’s just a small amount?

Since changes were brought in in 2017, if you earn less than £1,000 in a tax year, you

  • Don’t have to pay any tax, but more usefully
  • Don’t have to declare it on an SAR.


Copyright / / 2019