Answering the most common Self Assessment myths

Self Assessment season can be extremely stressful for many businesses and self-employed people, especially running up to the 31st January deadline. On top of the existing stress, there are many myths and misconceptions about Self Assessment and it can be difficult to know what is true and what isn’t, especially for those who are just starting. 

QuickBooks decided to compile some of the most common Self Assessment myths and to help make this time a little bit clearer and less stressful, used their expertise to answer them correctly, and debunk the ones that aren’t true.

1. I don’t need to complete a Self Assessment tax return unless I’m self-employed.

❌ THIS IS NOT TRUE. 

There are scenarios when you will have to complete a Self Assessment tax return, even if you’re unemployed. The situations when this may happen include: 

• Those who have earned £10,000 or more from savings, dividends, or investments.

• Those who have earned £2,500 or more in untaxed income, for example, if you rent out a property.

• Those who earn £100,000 via an employer

• If a person needs to pay Capital Gains Tax on profits from selling a second home, shares, or other chargeable assets. 

• If a person's (or their partner's) income was over £50,000 and one of them claims child benefit. 

• If somebody wants to claim tax back on work expenses over £2,500, private pension contributions, or donations to charity. 

You can view exactly who needs to complete a self-assessment tax return here.

2. I only need to complete a Self Assessment tax return if I owe tax

❌ THIS IS NOT TRUE.

Even if a person's income is below the thresholds for income tax and National Insurance, they may still need to submit a Self Assessment tax return. Even if somebody's circumstances have changed and they think they no longer need to file, it’s a good idea to check with HMRC and be sure or it may result in the person receiving a fine. 

3. If the deadline is missed, HMRC will automatically fine people.

✅ THIS IS TRUE. 

HMRC will automatically fine a £100 late filing penalty charge to anybody who is up to three months late - the later it is, the more money is charged. There are also fines for those who don’t pay their tax bill on time. 

For those who have a reasonable excuse for missing the deadline, this fine can be appealed. Potential reasons for missing the deadline can include:

• Death of a partner or close family member.

• A flood, fire, or theft that affects business.

• A serious illness.

You can find out more about appealing penalties here. 

4. An accountant is required to complete a tax return

❌ THIS IS NOT TRUE.

There is no legal requirement to use an accountant, however, we recommend businesses use accountants as they can double-check everything is correct and inform those who complete their tax return on anything they’re unsure of.

People can fill out and file their Self Assessment tax returns without an accountant - if all files are kept up to date, this will be even more straightforward. 

5. The Self Assessment process is long and difficult

❌ THIS IS NOT TRUE.

Completing and submitting Self Assessments can be daunting, but it doesn’t have to be! However, how long it takes completely depends on the reasons you need to do a Self Assessment tax return. For example, sole traders can make the process much simpler if files and documents are organised and kept on top of. 

Using accounting software such as QuickBooks can also help to make this process easier, quicker and less daunting, as they can work out any deductions, categorise expenses, work out what tax is owed, and ensure all figures are accurate. 

6. Online filing takes a long time

❌ THIS IS NOT TRUE.

Online filing is the quickest and easiest way to file your Self Assessment tax return - the majority of people file online. The time it takes to complete a tax return is totally dependent on each individual case, those who are more organised will more than likely complete the return quicker than those who aren’t. When filing online, users can revisit their tax returns as many times as they like before submitting them. The deadline for paper filing was actually on 31st October, so online filing is now the only choice for submitting tax returns. 

7. The 31st January deadline means tax returns can be done last minute

❌ THIS IS NOT TRUE.

Although some may leave their tax returns until the last minute, it’s best not to. This deadline is the final date they should be submitted, but it is always a good idea to get it completed and submitted before the deadline to prevent any stress or late submissions which result in a fine. HMRC actively encourages tax returns to be completed ahead of the deadline so that it is clear what tax is owed and allows for budgeting. 

8. Tax bills do not need to be paid in full. 

✅ THIS IS TRUE.

If somebody is unable to pay their owed tax in full by the deadline, HMRC can set up an affordable monthly payment plan which can help with this. This is another reason to have the tax return submitted ahead of the deadline, it can help set the payment plan up quicker. 

The government website has a full list of payment options and eligibility criteria for those worried about paying their tax bill - find it here.