If you are classed as self-employed or have a source of untaxed income, you will be required to complete a Self-Assessment. However, this criteria is vague and many are left confused as to whether they actually need to file the tax return or not.
The Technical Director of GoSimpleTax Mike Parkes provides clarity on the process:
Main types of self-employment
Typically, being self-employed relates to those who are a sole trader, part of a business partnership or director of a limited company. The latter two will definitely require a tax return to be completed.
If you’re a contractor using an umbrella company, it might not be necessary to file a Self-Assessment as they are technically your employer. Those who are employed and undertake freelance work as an additional source of income are still classed as self-employed and will need to file a tax return.
Those who carry out self-employed work as a sole trader will only need to submit the tax return if they earn more than £1,000. The same applies to those online sellers whose sales total exceeds this amount.
Even if you’re selling some possessions to earn extra cash, rather than build an online empire, you may be required to complete a Self-Assessment and pay any tax owed on the income. There may even be Capital Gains Tax due if an item is not a car and worth over £6,000.
Renting out property
If you’re a landlord earning £2,500 to £9,999 (after allowable expenses have been deducted), you’ll be required to file a tax return. This requirement also takes other factors into account, such as additional income from employment or a pension. Potentially, small rental profits can avoid the Self-Assessment and be handled by HMRC if they approve a request to adjust your PAYE code.
To work out your taxable rental profits, you first need to determine the type of renting. Rules differ for each situation: renting a room within your main property, letting a furnished holiday letting, and renting out a foreign property or one in the UK whilst you live overseas.
Being a Minister of Religion
Even though Ministers of Religion are technically employed and paid via the payroll of the Church, they are required to submit a tax return. On top of this, there is an additional form (SA102M) specific to this role which will need to be filled out.
The Church will supply you with a P11D form at the close of every year – this details the taxable benefits and reimbursed expenses you’ve received. Those expenses paid for by the Church can’t be claimed on, but any paid by you have the potential to be offset.
There are a few other situations that would require the submission of a tax return. These include income from savings and investment that are above £10,000, or if you earn foreign income.
Foreign income may also require you to complete the supplementary SA109 pages. There is specific criteria around this – you would be taxable on a remittance basis. You will also be taxable if you’re classed as a non-UK resident, not usually a UK resident, or have dual residence.