Spire Accountants

Self-Assessment for directors is required if you receive dividends or any other untaxed income in addition to your director’s salary.

A common reason for small owner managed company directors to register is that they will often have a director’s loan account with the company, and this can have several income tax consequences which are dealt with through self-assessment.

A partnership is a business which is owned and managed by more than one person. Each partner is jointly responsible for all aspects of the business and will share the profits. 

Partnerships have a requirement to complete and submit a self-assessment tax return to HM Revenue and Customs (HMRC).

In addition to the partnership registering for self-assessment, each partner must also register for self-assessment.

If income from self-employment is in excess of £1,000, then registration as a sole trader is required.

Registration is also beneficial in order to prove self-employment status for the purposes of applying for personal loans and for certain state benefits such as tax-free childcare.

If an individual who is a basic rate taxpayer has savings income of more than £1,000 then they should register. 

High-rate taxpayers are required to register if savings income is greater than £500.

Interest income would include, to name a few, interest earned from bank or building society accounts, government or company bonds, trust funds, unit trusts, life annuity payments, savings or credit union accounts.

Interest income from tax free ISAs does not need to be included in the self-assessment tax return.

If an individual has shares in a company, they may receive dividends. If dividend income is over £1,000, registration is required.  This threshold was previously set at £2,000 for tax year 2022/23.

Dividends would also include those from abroad (foreign dividends).

If you are resident and/or domiciled in the UK for tax purposes, you are taxable here on your worldwide income.

Overseas income includes interest, dividends, rental income, state pensions and personal pensions to name a few. 

The ‘High Income Child Benefit Charge’ (HICBC) is a tax charge which applies to anyone with an income over £50,000, who claims Child Benefit or whose partner claims it. If you or your partner earns over £50,000, you must register for self-assessment.

You can ask HMRC to opt you out of the child benefit scheme and this would no longer require a self-assessment submission to be made every year.

If you have disposed of assets and made a gain more than £6,000 (this is net of any losses made on disposal), you should register for self-assessment. This threshold was previously set at £12,300 for tax year 2022/23.

Even if your total gain is less than £6,000 (the capital gains allowance), you will still have to report to HMRC via self-assessment if the total proceeds from the disposals were 4 times your capital gains allowance and you are already registered for self-assessment.

If you are an employee and have incurred work expenses of at least £2,500 which your employer was allowed to reimburse you for tax free, but they have not done so, then you can claim the tax relief via self-assessment.

If the total non-reimbursed expenses were under £2,500, a P87 form can be filled out and sent to HMRC.

If your combined earnings for the year are more than £100,000 then you will meet self-assessment criteria and be required to complete a tax return each year.  

The reason for this is because once you earn over £100,000 then you will start to lose entitlement to your personal tax-free allowance. The tax-free allowance for 2021/22 was set at £12,570; however, for every £2 that you earn over the £100k mark you will lose £1 of your personal allowance.

If you have a combined dividend and interest income for the year of at least £10,000, you will have to register. 

The £10,000 threshold should not include any amounts received from tax free ISAs.

 If an individual has a combined income of more than £2,500 which is not taxed (rental income, savings income, investment income for example) self-assessment registration will be required.

You should register if your rental income is over £10,000 before any allowable expenses or is over £2,500 after allowable expenses.

HMRC may be able to collect tax on any profit you make from renting through your tax code if it was more than £1,000 but below £2,500. HMRC would have to be contacted by the individual to ask for this amendment otherwise self-assessment registration is required.

A tax year begins on the 6th April of one year until the 5th April of the of next year.

This is the date after the end of the tax year for which registration is required.

Paper tax returns must be submitted after the end of the tax year by this date.

Online tax returns must be filed after the end of the tax year by this date.

Tax must be paid by the return filing date. 

If you have paid 80% or less of your tax bill at source for the tax year covered by the return  or your tax bill is over £1,000 you will have to make payments on account for the current tax year. Two payments on account will have to be made which each equal half of the self assessment tax bill for the return filed. Payment 1 will be due on the filing date and payment 2 will be  due by 31 July after the end of the current tax year.