What is Self-Assessment and its Importance

What is Self-Assessment and its Importance

The term self-assessment refers to completing your own tax return each year. The process is called self-assessment as individuals submit their earnings – which they have earned in addition to any regular income where tax is collected via PAYE – and can calculate what they owe, although HMRC will also send a tax bill to ensure all numbers are correct.

Self-assessment is important as it ensures individuals pay the correct amount of tax. For example, if an individual is earning an additional income because they rent a property out to tenants, they need to pay tax on those earnings, even if they work full time and tax is collected via their tax code.

Who Needs to Complete a Self-Assessment?

Completing a self-assessment tax return isn’t necessary for everyone. However, if you have any additional income on top of a regular job, then it is likely you need to complete one.

Some examples of people who need to complete self-assessment include:

  • Company directors

  • Self-employed individuals

  • Trustees

  • Those with foreign income

How to Get a Self-Assessment

To register for self-assessment you need to notify HMRC, who then send you a Unique Taxpayer Reference to use in all your correspondence. Once you have this ten-digit number, you can then submit self-assessments either via the paper form or online. HMRC also help to ensure you complete everything on time by sending reminder letters when you need to complete your tax return.

Completing a self-assessment is easy to do, and will ensure you’re always paying the correct amount of tax on your earnings.