Top tips: Self assessment

With the clock ticking ahead of the 31 January deadline for declaring your income and capital gains in the 2023/24 tax year, we present top tips for completing your self assessment return.

1. Understand if you need to complete one

Most people understand that if they are a self-employed sole trader, limited company director or partner in a business partnership then they need to complete an annual self assessment return. But there are a number of other qualifying factors which some people might not be aware of.

These include if your total income (minus tax relief) is more than £100,000, even if it is all taxed at source; if you earned £2,500 or more from property or land in the UK (or £10,000+ before expenses), if you made any capital gains in the last tax year; if you got more than £10,000 from savings interest, bare trusts, interest in possession trusts or share dividends; of if you or your partner's income was over £60,000 and you claim child benefit. Use this tool if you are unsure.

It might also be wise for you or your partner to complete a self assessment tax return to ensure you meet the requisite number of qualifying years of National Insurance to get the full basic State Pension when you retire. If you didn't pay enough NI in the last tax year for it to count as a qualifying year, you can make a voluntary Class 2 NI contribution via a self assessment return.

2. Don't miss out on pension tax relief

The ways in which the tax relief on private pension contributions is claimed differs depending on your income and the type of pension contribution made. For some people tax relief is applied automatically by the employer before they are paid. For others, including every person contributing to personal and stakeholder pensions and some with workplace pensions, they need to claim all or some of the higher rate tax relief on their self assessment tax return.

If you earned over £50,270 in the 2023/24 tax year and are unsure about how the tax relief on your pension contributions are applied, make sure you check with your employer. If you need to

be claiming back any extra tax relief you’re owed, don’t miss the deadline to submit your return.

3. Be rewarded for your generosity to charities

If you donated to a registered charity (or community amateur sports club) and are a higher rate or additional rate taxpayer, you can claim extra tax relief in your self assessment on your generosity. You are probably aware that charities are often keen for you to donate through gift aid because it means they can claim an extra 25p for every £1 you give. But did you know higher-rate and additional-rate taxpayers can claim back the difference between what the charity got and the tax you paid on your donation? A great extra incentive for giving to good causes.

4. Check if you’re entitled to the marriage allowance

More than 2.1 million couples claim the marriage allowance, but with HMRC estimating there are 4.2 million couples eligible, are you one of the 2 million couples who are neglecting to claim this free tax rebate in your annual self assessment return? The scheme enables people who have income less than the personal allowance (£12,570 in the last tax year) to transfer up to £1,260 of their unused personal allowance to their husband, wife or civil partner. This translates to a tax saving of up to £252 per tax year, and it’s possible to backdate the claim to April 2021.

5. Don’t leave it until the last minute

Life can be busy but leaving your tax return to the last minute can backfire. Even if you come to submit the return before 31 January, if you discover you’ve lost your Government Gateway user ID or UTR (Unique Taxpayer Reference) number, you might need to wait for codes to arrive in the post which can take up to seven days. Late submissions can result in an immediate £100 penalty while interest will accrue on overdue bills. Doing your return earlier in the year not only gives you longer to budget for the payments but also removes the risk of missing the deadline.

6. Be aware and prepared for payments on account

Unless your last self assessment tax bill was less than £1,000, or 80% or more of your tax was deducted at source through PAYE, you will need to make two payments on account per year towards your self assessment tax bill. HMRC estimates how much tax you owe based on your previous year’s tax bill and divides the balance into two payment deadlines: midnight on 31 January (your first payment on account for the upcoming tax year, as well as any outstanding tax owed from the previous tax year) and midnight on 31 July (your second payment on account for the upcoming tax year). The second payment deadline catches many taxpayers out, leading them to pay more than they need to if they forget the deadline or haven’t budgeted accordingly.

7. Get professional help if you need it

Understanding allowance and disallowable expenses, and all of the tax reliefs available, can be daunting and confusing, so don’t be afraid to ask for help with your self assessment. An experienced accountant will not only reduce the hassle of submitting your tax return but also ensure you are claiming everything you're entitled to. It could even mean their fee pays for itself in the tax they save you.