Outsourcing - Self Assessment Tax Returns

Most employees are not required to submit a self assessment tax return as their tax is deducted at source under the PAYE scheme. However, self-employed persons or partners in a business partnership and directors of limited companies are required to submit these returns due to the likely mix of salary, dividends, expenses and any higher rate tax liabilities that they may have.

It is also a requirement that all other sources of income are declared, which may include income from previous employment, rental income, interest from investments, capital gains, dividends from other shareholdings and finally, any taxable benefits such as a company car or private medical insurance. This return will also allow the individual to claim any allowances that he or she is entitled to such as personal allowance and tax relief on pension contributions should any of these not have been claimed under the PAYE scheme.

It is essential, and also a legal requirement, to keep records relating to personal income for at least 22 months after the end of the tax year; the self-employed are required to keep records for five years and ten months. The main records for anyone that has some income taxed under PAYE includes payslips, P60’s showing yearly income, P11D’s showing yearly taxable benefit and finally, any P45’s should the individual’s employment have changed within the tax year. Directors and the self-employed (including partnerships) should also keep all records which have been used to prepare business accounts.

Other common personal income records that may be required include dividend vouchers, information of state or personal pension benefits and bank and credit card statements received.

The self assessment return should be completed and returned to HMRC by the 31st January following the tax year it is in connection with. An individual may submit the return by the 30th September and HMRC will guarantee to calculate and inform him or her of their liability in time for the 31st January. However, if the individual uses an accountant to calculate the liability, the 31st January is the only date which he or she should be concerned with.

For the tax year 2007/08 onwards, there will be two separate filing dates. For paper returns, the filing date is 31st October following the end of the tax year. For returns filed online, the normal 31st January deadline will apply. For individuals who wish HMRC to calculate their tax liability, the cut off date will move from 30st September to 31st October, so that it is aligned with the new paper return filing date.

Payment of the liability calculated is due on the 31st January following the related tax year. In some cases payments on account are also due for the following year; this is the case when an individual’s tax liability, after deductions such as PAYE, exceeds £500 and exceeds 20% of the total tax liability of the individual. Payment is due on the 31st January and the 31st July of the tax year in question and is deducted from the payment due on the following 31st January.

There is an automatic fine for a late self assessment return of £100, however further fines and penalties may be imposed should the return and/or the tax due continue to be overdue.

See also in this section...

• Contract Review (Legislative Compliance & Risk Assessment) [Read Fact Sheet >>]
• Invoicing, Payment Terms & Credit Control [Read Fact Sheet >>]
• VAT [Read Fact Sheet >>]
• Corporation Tax [Read Fact Sheet >>]
• End of Year Accounts [Read Fact Sheet >>]
• Self Assessment Tax Returns [Read Fact Sheet >>]
• Payroll Calculations [Read Fact Sheet >>]
• Expenses Processing [Read Fact Sheet >>]