Self Assessment Tax Return: Which Year to File and Key Considerations

Imagine this: It’s the end of January, the tax season is in full swing, and you’re suddenly hit with the realization—do I need to file a self-assessment tax return? And more importantly, which tax year does it apply to? This is a common scenario, and the confusion surrounding tax years, deadlines, and requirements can often lead to unnecessary stress. Let’s cut through the noise and understand what you need to know to navigate this crucial part of your financial responsibilities.

Understanding the Tax Year

In the UK, the tax year runs from April 6th to April 5th of the following year. For example, the 2023/2024 tax year would start on April 6th, 2023, and end on April 5th, 2024. When filing a self-assessment tax return, you’re essentially reporting your income and any capital gains for the tax year that ended on April 5th. This means that if you’re filing a return by the deadline of January 31st, 2025, you’re filing for the 2023/2024 tax year.

Who Needs to File a Self-Assessment Tax Return?

It’s essential to first establish whether you need to file a self-assessment tax return. You must file if:

• You’re self-employed as a ‘sole trader’ and earned more than £1,000.
• You’re a partner in a business partnership.
• You’re a director of a company and have untaxed income.
• You earn over £100,000.
• You have income from savings, investments, or property.
• You need to claim tax reliefs.
• You have income from overseas.
• You received untaxed income not covered by PAYE (Pay As You Earn).

Filing a return even when you don’t strictly need to can also be advantageous. For example, you may want to claim tax relief on pension contributions or work-related expenses.

The Importance of the Correct Tax Year

Filing for the correct tax year is crucial. A common mistake is to assume that the tax return due by January 31st, 2025, relates to income earned in 2024. However, it’s actually for the 2023/2024 tax year. Misunderstanding this can lead to errors, late filing penalties, and unnecessary stress.

Key Deadlines to Remember

• Paper Tax Return Deadline: October 31st following the end of the tax year. For example, for the 2023/2024 tax year, this would be October 31st, 2024.
• Online Tax Return Deadline: January 31st following the end of the tax year. For the 2023/2024 tax year, this would be January 31st, 2025.
• Payment of Tax Due: January 31st. You may also need to make a payment on account by July 31st if you’re self-employed or your tax bill is over £1,000.

Avoiding Common Mistakes

1. Missing the Deadline: Missing the January 31st deadline results in an automatic £100 fine, which increases if the delay continues.

2. Incorrect or Incomplete Information: Double-check all entries to avoid the risk of penalties for inaccuracies.

3. Ignoring ‘Payments on Account’: These are advance payments towards your tax bill, and neglecting them can lead to a larger bill at the end of the year.

Filing Your Return

Filing your return can be done in several ways:

• Online via HMRC’s website: This is the most common method, offering immediate submission and instant confirmation.
• Paper form: Less common but still an option, especially if you prefer a tangible record.
• Using an accountant: Particularly useful if your financial affairs are complex.

Benefits of Early Filing

Filing your tax return early has several advantages:

• Peace of Mind: Early filing reduces stress and gives you time to gather any missing information.
• Earlier Refunds: If you’re due a tax refund, filing early means you’ll receive it sooner.
• Time to Plan for Payments: Knowing your tax liability well in advance allows for better financial planning.

What Happens if You Don’t File?

Failing to file can lead to:

• Penalties: As mentioned, these start at £100 but can escalate.
• Interest on Late Payments: Interest accrues on any unpaid tax from the due date.
• Increased Scrutiny from HMRC: Repeated failure to file or pay on time may lead to more rigorous investigations.

The Role of Self-Assessment in Financial Planning

Self-assessment isn’t just about meeting legal obligations—it’s also a key part of your financial planning. By keeping accurate records and understanding your tax obligations, you can make informed decisions about investments, savings, and expenditure.

In conclusion, the key to managing your self-assessment tax return is understanding which tax year you’re filing for, staying aware of deadlines, and ensuring that your return is accurate and complete. By doing so, you’ll avoid penalties, reduce stress, and be in a stronger position to manage your finances effectively.