There are many taxes the government issues out to civilians, companies, and even industries in this day and age. The amount tagged to these taxes is often huge, making many people want to evade taxes.
That said, a self-assessment is a tool that ensures people pay all their missed taxes, no matter how long it’s been due. Many people don’t know much about self-assessment, which is why they land in trouble often. If you’re one of these people, don’t fret. This article will help to highlight five of the most important things to know about self-assessment.
1. First off, What is Self-Assessment?
As mentioned previously, many people don’t know what self-assessment is and how beneficial it can be to individuals if they play their cards right. Simply put, a self-assessment is a tax tool used by the government to get taxes from non-traditional workers in the workforce. They also use it to get taxes from people who like to skip.
The self-assessment tool works simply. On a typical day, the tax system would simply deduct a particular person’s specific amount. That easy transaction isn’t easy to do with non-traditional workers like freelancers and contractors. In that case, the HRMC uses this tool to collect taxes from these freelancer and contractor individuals.
If you’re feeling lost, don’t fret. Below are some more facts on self-assessment, including how to register for a self assessment deadline.
2. Who Needs the Self-assessment?
The people who use this self-assessment tool the most are freelancers, contractors, and small business owners. This is because they don’t have the standard paycheck millions of other people do. However, the following people also need the self-assessment tool for various reasons:
- If you have more than one additional source of income
- If you find yourself making a loss on your investments
- People that need to reimburse child benefits
- People who want some tax relief on their pension
3. Important Dates to Keep in Mind
Now that you know what the self-assessment deadline is and who needs it, you must know some important dates to keep in mind. These dates would keep you from getting into trouble.
- April 5
This is the date where the tax year ends. You must ensure you pay all your taxes before this time.
- April 6
April 6 is the start of a new tax year. In an ideal situation, you shouldn’t get taxed until the end of a tax month.
- January 31
This is the date where you would need to fill in your tax returns online. During this period, you would also need to pay your tax bill.
- July 31
This date is one that freelancers, business owners, and contractors should keep in mind at all costs. This is the period where you’d have to pay attention to the “payments on accounts” section the most.
- December 30
This date is when you should submit your online returns. The HMRC would calculate your taxes based on the wage amount you have submitted in your form.
- October 5
October 5 is the deadline to sign up for the self-assessment returns. Businesses can exempt themselves from doing this their first year, but they need to start doing it during their second.
- October 31
October 31 is the standard deadline for proper tax returns.
4. The Self-Assessment Deadline
As mentioned earlier, the deadline for signing up for the self-assessment returns is October 5. If you haven’t signed up by then, be prepared to face the following penalties:
- A £100 fine
- An additional £10 a day for every day you miss the deadline
- After three months, they would go further to add £300, or 5% of the tax you’re owing.
- After a year, they would add another £300 or 5%, whichever value is higher.
- When you finally want to pay the tax, you would have to pay interest.
5. How Do You Register?
Luckily, the registration process is not complex or challenging. Before you are eligible for returns, you must first sign up for a self-assessment with the HMRC. There are several classes to register under, depending on what you do for a living:
- Self-employed people, freelancers, and sole traders would register limited company under a particular class that the HMRC determines.
- If you register for a self-assessment for reasons other than the one mentioned above, they would also register you under a class.
- If it’s a business partnership, there is a particular class that the HMRC would assign to you.
You may be thinking taxes aren’t necessary, but they are. Without taxes, there would be a total economic breakdown in a matter of days or weeks. People would have a hard time trying to coexist with others, as the competition for simple things like food and shelter would sharply increase. That said, the above are five crucial facts you should know about the self-assessment, which include its deadline.