Who needs to complete a tax return?

If you pay tax on your earnings or pensions through PAYE (Pay As You Earn) tax is deducted automatically and self-assessment is not usually necessary. But if you have more complicated tax affairs, you may need to complete a self-assessment tax return. This includes the self-employed, company directors or trustees and people who have foreign or rental income.

It also includes employees and pensioners whose annual income is more than £100,000, those who receive untaxed income of more than £2,500 a year, have annual investment income of at least £10,000 or claim £2,500 or more in expenses.

How does it work?

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Most people will receive the standard ten-page form, which asks for information on income from savings, investments, state benefits and pensions. It also covers allowances and tax reliefs for which you may be eligible, such as work expenses. There are also nine supplements that you have to fill in if your income comes from elsewhere, such as land and property.

HM Revenue & Customs will then work out your tax bill (though you can work it out yourself if you wish) and send you a statement showing what you have paid, what you owe and a set of payment dates.

The forms can be completed on paper or online, but you will face penalties and interest charges if you do not complete your form on time. If you think that you need to file a tax return, for example if you have recently become self-employed or a landlord, you must contact your local tax office as soon as possible.

Key dates

Soon after the start of each new tax year (April 6) the Revenue sends a tax return for the previous tax year to everyone who normally completes one. After that there are some important dates you need to remember:

September 30: the deadline to file your paper return if you want the Revenue to calculate you tax for you in time for the January 31 deadline.

October 31: the final date to file paper returns. If you miss this, you will have to file online.

January 31: final deadline for online tax returns and to pay any tax and national insurance due.

Some tips

The key to successful tax returns is good record-keeping and allowing yourself plenty of time to fill in the forms. Before you start, you will need to gather all the relevant paperwork.

Tony Levene, author of the Which? Tax Handbook, says: “Before starting, collect together all you need to complete your return. That’s your P60 if you’re employed or receive a pension, plus details of any fringe benefits and expenses. If you are self-employed or have rental income, you will need copies of your accounts and expenses. You will also need your bank statements if you receive interest on your bank account, plus details of any income from investments and savings.”

One of the most common errors is forgetting to sign the form. Also take care not to make basic numerical errors, such as putting a decimal point in the wrong place. Read and re-read the form to ensure that you have not made any mistakes or left anything out. Always keep copies of your return and everything else you send to the Revenue.

You can hire an accountant to complete the form for you, but this will usually cost at least £100.

Fines and penalties

About 10 per cent of taxpayers who have to fill out a tax return are fined £100 by the Revenue every year for failing to meet the January 31 deadline. If your return is still outstanding six months later, you will be charged a further £100.

If you miss a payment, the Revenue will charge interest at 7.5 per cent from the date that the payment was due, as well as a late-payment penalty. If you still have not paid by the end of February, you will be charged a 5 per cent surcharge on the tax due, which rises by a further 5 per cent of the amount due if you still have not paid by July 31.

For help with filling in self-assessment forms, call the HMRC helpline on 0845 9000444 (8am-8pm seven days a week, including bank holidays). For extra forms or help sheets, call the HMRC orderline on 0845 9000404.

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