Self-Assessment Tax Return Process for Self-Employed and Foreign Incomes

Table of Content

1. What is Self-Assessment Tax Return (SATR)?
2. Who is required to file a SATR?
3. Registration Process and Deadlines of Self-Assessment Tax Return
4. Keep all the Essential Information Before Filing for SATR
5. Self-Assessment Tax Return for Self-Employment
6. Self-Assessment for Foreign Income or Gains
7. How Long Do Individuals have to Obligate Self-Assessment?
8. Seek Advice of a Skilled Tax Advisor for Help

What is Self-Assessment Tax Return (SATR)?

SATR encompasses all details regarding each year’s income, capital gains, claimed & applicable allowances and reliefs. Certain taxpayers under Self-Assessment Tax Return (SATR) must file a tax return via form SA100. A tax return is a legal document, and all sources of income, no matter how minor they are, must be mentioned or specified by the individual in the form.

The majority of employees in the United Kingdom pay all taxes through the PAYE system and do not need to file a tax return. However, individuals with foreign incomes must file a tax return; therefore, tax affairs can be complicated.

A Self-Assessment Tax Return may seem intimidating. However, it appears much easier if the individuals are pre-arranged, systemised, and organised for what they will be asked and required. Therefore, one has to understand the processes very acutely to file them correctly and avoid penalties.

Who is Required to File a SATR?

The question is raised in everyone’s mind when it comes to pay the tax returns and fill the forms, do I need to fill in a SATR? Thus, it is essential to find out who is required to pay and who is not.

Self-Assessment Tax Return has defined criteria by HMRC for individuals, fall under the tax return, are given below:

• A person with a self-employment income of more than £1,000.
• A person who acquires income by renting property more than £2,500 (If below than £2,500, not required to pay)
• All commissions a person receives other than salary.
• A person who makes money by selling assets such as stocks or second residences.
• Shareholders and partners, having an income of more than £50,000.
• A person who earns more than £50,000 and receives a pension must undergo an assessment.
• A trustee of a trust with more than one pension scheme.

However, an employee who pays tax through the Pay As You Earn (PAYE) system cannot pay SATR. Individuals with more than one income source or foreign income have to undergo the Self-Assessment Tax Return Process.

Registration Process and Deadlines of Self-Assessment Tax Return

Predominantly, any individual who interacts with SATR needs to register for Self-Assessment. Self-employed, non-self-employed, partners, trustees, and shareholders all have to go through different ways of the registration process.

SATR follows the tax year for submitting tax returns, not the calendar year, i.e., for the 2020/21 tax year, a person will pay between April 6, 2020, to April 5, 2021.  After registering for Self-Assessment, you have two choices: filing a paper tax return or filing online.

It must be sent to HMRC within three months from the date of issue of the return. Thus, if you register on December 5, 2021, and file a paper or online tax return, you must submit your return by midnight on February 28, 2022. If the dates are not reached, however, HMRC will impose strict restrictions, and you may be charged a penalty cost as well as interest on late payments.

Keep all the Essential Information/Records Before Filing for SATR

Filing for SATR or understanding the process is relatively simple if you have all the essential information. Make sure you have the following information before you begin:

• Ten-digit Unique Taxpayer Reference (UTR).
• National Insurance Number (NIN).
• Untaxed income details from the tax year.
• Self-employment income records.
• Self-employment all expense’s records.
• Charity and pension contributions data.
• Already paid tax records or P60 form.

As there are two sections to a SATR where the required information is put in. The first main section is the SA100 and the second main section is the supplementary page.

SA100 section entails detailed information such as Taxed & Untaxed Incomes, Dividends & Interests, Pension Contributions, Charitable Donations, State Pension, Child Benefit and Blind Person’s Allowance. 

On the contrary, the supplementary page is filled by a company director, a foreign resident, self-employed from abroad, property sellers. 

Self-Assessment Tax Return for Self-Employment

All income, profits on tax returns, savings income, employment income, overseas income, and capital gains are self-employment. On the other hand, Self-Assessment requires a self-employed person to fill out all of the business’s income and costs.

Details of the business income and various business expenses must be added into tax return self-employment forms.

Self-employed must fill out self-employment forms such as SA103 and SA100. Individuals earning less than £85,000 per year, on the other hand, will complete the short pages of SA103S rather than the full pages of SA103F.

Taxable profits from self-employment aid determine how much income tax and Class 4 National Insurance payments must be paid. However, if the tax return is entirely online, the online system will calculate the income tax liability.

Self-Assessment for Foreign Income or Gains

Foreign migrants working in the UK have to complete a formal tax return each year, even if their employment taxes are dealt with under PAYE. Also, foreign residents with foreign income have to complete a tax return in the UK.

Foreigners must retain records of their taxes paid while in residence, their domicile status, and information about their foreign earnings and gains. Furthermore, various comprehensive data linked to tax remittance, such as bank statements, must be kept safe to file SATR forms.

You will have to keep them safe for at least 22 months from the end of the taxation year. For example, you must keep records until at least January 31 2023, for the tax year 2020/21 (from April 5 2021).

How Long Do Individuals have to Obligate Self-Assessment?

There is no specific duration for paying Self-Assessment Tax Return to HMRC, as it varies from situation to situation. Three scenarios have been described below according to deal with the different conditions.

First Scenario: A foreign person who will no longer be a resident of the UK and think they might not be considered under the complicated tax affairs of Self-Assessment. If a person has already received a notice of tax return, in this situation, can call HMRC and request to withdraw or remove from SATR in the future.  

Second Scenario: If a person is a UK resident and has been issued a notice to file a tax return, then it is a legal obligation to complete one; otherwise, HMRC will issue a penalty.

Third Scenario: If a person has ceased self-employment or left the UK, he will need to fill in a tax return for the year his self-employment ends or the year that he leaves. The date you stopped being self-employed or left the UK should be shown on your tax return so that HMRC can close your Self-Assessment record and stop sending you tax returns to complete.

Seek the advice of a Skilled Tax Advisor for Help

A tax expert might be able to assist you with your tax situation. Authorise a tax consultant to deal with HMRC on your behalf. In addition, an expert accountant will verify that you do not make any mistakes.

Although accessing Self-Assessment through the internet, filling it out correctly might be difficult, especially if you are new to the process. It is possible to make mistakes, and these mistakes can be costly. A tax expert has filled out innumerable tax returns and is well-versed in the process. Hence he can help you in the Tax legislation of Self-Assessment Tax Return.