We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA
HMRC has clarified the rules about five common misconceptions around registering for self-assessment and paying tax as a self-employed worker
The number of people working for themselves – either full-time or as a side hustle – is on the rise. Anyone who needs to complete a self-assessment tax return for the first time to cover the 2023-24 tax year, should register for self-assessment with HMRC by 5 October 2024. Any tax owed will have to be paid by 31 January 2025.
In order to clear up some misunderstandings, HMRC has highlighted five of the most common myths around self-assessment:
Myth one: ‘HMRC hasn’t been in touch, so I don’t need to file a tax return.’
Reality: It is the individual’s responsibility to determine if they need to complete a tax return for the 2023/24 tax year. There are many reasons why someone might need to register for self-assessment and file a return. These include:
- you are newly self-employed and have earned gross income over £1,000
- you have earned below £1,000 and wish to pay Class 2 National Insurance Contributions voluntarily to protect your entitlement to the state pension and certain benefits
- you are a new partner in a business partnership
- you have received untaxed income over £2,500
- you receive Child Benefit payments and need to pay the High Income Child Benefit Charge because you or your partner earned more than £50,000.
Anyone who is unsure if they need to register for self-assessment can use the free online tool on GOV.UK to check. Once registered, they will receive a Unique Taxpayer Reference, which is needed to complete a tax return and pay any tax due.
Customers will have to reactivate their account if they have registered for self-assessment previously but did not send a tax return last year.
Myth two: ‘I have to pay the tax at the same time as filing my return.’
Reality: This is false. The deadline for customers to pay any tax owed for the 2023/24 tax year is 31 January 2025. Customers may also be able to set up a Budget Payment Plan to spread the cost of their next tax bill, by making weekly or monthly direct debit payments in advance.
Myth three: ‘I don’t owe any tax, so I don’t need to file a return.’
Reality: Even if a customer does not owe tax, they may still need to file a self-assessment return to claim a tax refund, to claim tax relief on business expenses, charitable donations or pension contributions, or to pay voluntary Class 2 National Insurance Contributions.
Myth four: ‘HMRC will take me out of self-assessment if I no longer need to file a return.’
Reality: Customers must tell HMRC if they have stopped being self-employed or if they don’t need to file a return. If not, HMRC will keep writing to them to remind them to file their return and may charge them a penalty if they don’t. If customers think they no longer need to complete a tax return for the 2023/24 tax year, they should tell HMRC online as soon as their circumstances change.
Myth five: ‘HMRC has launched a crackdown on people selling their possessions online and now I will have to file a self-assessment return and pay tax on the items I sold after clearing out the attic.’
Reality: Tax rules have not changed in this area. If someone has sold old clothes, books, CDs and other personal items through online marketplaces such as eBay, they do not need to register for self-assessment or pay income tax on the sales of their belongings. HMRC guidance on selling online and paying taxes can be found on GOV.UK.
