Why must I fill in a self-assessment tax form when other people are let off?
Your recent article about more pensioners being pulled into income tax talks about the simple tax calculation many people receive in the post after the end of each tax year.
Many people fill in a self-assessment tax return for income earned above the £12,570 personal allowance.
Why are some people not required to do this, and why do they get a simple calculation instead?
Tanya Jefferies, of This is Money, replies: Filling in an annual tax return is a headache. Many people will be disgruntled about the task and want to avoid it if possible.
More people are breaching the frozen £12,570 income tax threshold - particularly pensioners with small private pensions - but do not necessarily have to fill in tax returns.
Income tax: Filling in an annual return is a headache people would rather avoid - but don't risk the penalties
If your only income source is your employer your tax is all sorted out for you via Pay As You Earn.
In some cases, when people have income from outside of employment but still have relatively straightforward tax affairs, HMRC does the calculation for them automatically and sends out an end-of-year demand.
Where people's income starts getting more complicated, for any one of a number of reasons which are explained below, they have to submit an annual return.
It's important to find out and fulfil your responsibilities regarding income tax, because if you should file a self-assessment return but neglect to do so you will face stiff penalties.
We asked our resident tax guru, Heather Rogers, to explain when you need to fill in a self-assessment return and when you can expect to wait and receive a simple tax calculation in the post from HMRC.
Heather Rogers, founder of Aston Accountancy and This is Money's tax expert, replies: Your first stop should be HMRC’s online tax return checking tool.
This will take you through a series of questions about your income and other finances, and then tell you if you need to complete a self-assessment return or not.
It is your responsibility to tell HMRC about your income and penalties can be severe for failure to do so.
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When should you fill in a self-assessment tax return?
Here are some of the common reasons why you may need to complete a return.
- You receive investment income from investment portfolios where the funds are not in an Isa.
- UK dividends are received from UK companies which exceed £500, or if your UK dividends are below £500 and you have foreign dividends as well.
- Your foreign dividends exceed £500, or your foreign dividends are below £500 but you have UK dividends as well.
- You receive foreign interest payments.
- You receive income as a sole trader and your sales are in excess of £1,000, before you take off any expenses.
- Income from a partnership is received.
- You are getting an income from property (rental income) that exceeds £10,000 gross, irrespective of the amount of expenses to be set off, or if the net amount after expenses is more than £2,500.
HMRC may be able to collect via PAYE or Simple Assessment if your net rental is below £2,500 but you will need to tell them. If your gross rental income (before expenses) is below £1,000, you don’t need to tell HMRC.
- You are receiving income from a trust or settlement or any income from the estate of a deceased person and further tax is due on that income.
- Your capital gains exceed the personal capital gains allowance of £3,000 a year.
- You have any other untaxed income such as commission or tips which have not been subject to Pay As You Earn.
- You are a Lloyd’s name.
Meanwhile, you may also need to fill in a tax return to claim certain allowances and reliefs.
- Business Asset Disposal Relief
- Relief on a pension payment which has not been given relief at source
- Relief after you made an investment into a Venture Capital Trust or an Enterprise Investment Scheme or similar.
Note that for tax years 2024/25 onwards, you only need to file a tax return to report High Income Child Benefit Charge if you choose not to pay the charge via PAYE.
If you have filed tax returns in the past but think you no longer need to do so, you must inform HMRC.
When will you get a simple tax calculation instead?
HMRC can send a simple assessment where it has all the information about your income from third parties and not all is taxed at source, such as via PAYE.
It receives information from:
- Your employer or your private pension provider regarding your income and tax paid
- Banks and building societies regarding interest paid
- The Government about income from state paid benefits such as your state pension.
You may also have advised HMRC on a small amount of income from other sources which it may have agreed to include in your simple assessment.
However, if this is the case, you will need to report any changes year-on-year to HMRC, or the amount you are taxed on may not be correct.
In these cases, HMRC would not normally need a tax return completed as all the income is known to it.
If this is the case, you will receive a simple assessment showing a tax calculation. Do check it is correct - the details of your income and tax will be shown on the letter.
Sometimes you may receive a simple assessment which is incomplete due to you now being in receipt of a new self-assessment reportable source of income for which you have just registered or are in the process of registering for self- assessment.
Don’t let the simple calculation lull you into a false sense of security – you will still need to file a tax return.
When you receive your simple assessment:
If you have underpaid, you can pay HMRC directly or if your circumstances permit, you can opt to have the underpayment collected through your tax code for the following year.
If you have overpaid and do not have a personal tax account (see below), then you can claim your tax refund here.
You need online banking for a bank transfer into your account, as you will need to log into your online banking to authorise the repayment. Otherwise, HMRC will send you a cheque.
If you are worried you have not received a simple tax calculation when you expected to do so, you can check up online in your personal tax account.
If you have set this up, your simple assessment letter and any codes will appear in it. If you wish to set one up and haven’t done so, you can check your tax position without waiting for the letter to arrive.
You need a passport or driving licence, NI number and details about your income. If you have a P60 from employment or a private pension have it to hand.
Set up a personal tax account here.
Important changes are on the way for rental and self-employment income
For some types of income, even if you are completing a tax return, you may start needing to report to HMRC quarterly under the new Making Tax Digital rules.
These come in from April 2026 and when you need to report depends on your gross income.
If you are a landlord or self-employed and your income from your businesses or your rentals, or both combined, exceeds the total below then you will need to register for Making Tax Digital and submit quarterly returns using software.
6 April 2026 - Gross income (before expenses) of £50,000
6 April 2027 - Gross income (before expenses) of £30,000
6 April 2028 - Gross income (before expenses) of £20,000
Ask Heather Rogers a tax question
Tax expert Heather Rogers answers our readers' questions
Heather Rogers, founder and owner of Aston Accountancy, is our tax columnist. She is ready to answer your questions on any tax topic - tax codes, inheritance tax, income tax, capital gains tax, and much more.
If you would like to ask Heather a question about tax, email her at taxquestions@thisismoney.co.uk.
Heather will do her best to reply to your message in a forthcoming monthly column, but she won't be able to answer everyone or correspond privately with readers. Nothing in her replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes.
If Heather is unable to answer your question, you can find out about getting help with tax here, including sources of free professional advice if you are elderly and/or on a low income.
You can also contact MoneyHelper, a Government-backed organisation which gives free assistance on financial matters to the public. Its number is 0800 011 3797.
Heather gives tips on how to find a good accountant here, including when to seek help, hiring the right type of firm and typical costs.
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