Employees have their income tax and NICs deducted from their pay prior to being paid. As a
self-employed individual, you will need to do this yourself.
A self assessment is what you use to report your income to HMRC and pay the relevant
income tax and NICs where applicable.
If you are operating as a sole trader and earned more than £1,000 income from your self employment
business in a tax year, you will need to complete a self assessment tax return, although you may not be required to pay any taxes.
If you are operating via a limited company and paying yourself a salary over the lower earnings limit (£12,500 for 2019/20) in addition to, or instead of, dividends, then you will also need to complete a self assessment tax return.
Key Dates
Register for Self Assessment - 5th October
Complete Paper Tax Return - 31st October
Complete Online Tax Return - 31st January
Pay Tax - 31st January
You should note that automatic interest and penalties apply for failure to file your tax return and pay your tax on time.
Step 1: Visit www.gov.uk/self-assessment-tax-returns/
Step 2: Follow the links to register
Step 3: Complete your registration. You will receive login details for the Government Gateway.
A payment on account is an advance payment on your next tax bill. It is a way for HMRC to ensure that you can’t benefit from paying your tax in arrears.
You will need to pay in this manner if your previous self-assessment tax bill was more than £1,000 and you didn’t pay more than 80% of your taxable income through PAYE (in employment income), so for those in full-time self-employment, this is likely to apply.
Payments on account are paid twice a year (by 31st January in addition to the balance due for the previous tax year, and by 31st July). They each equate to 50% of your previous year’s tax bill.
For example:
Your total tax bill for the 2017/18 tax year was £5,000 which was paid by 31st January 2019.
You pay your first payment on account for the 2018/19 tax year also by 31st January 2019 of £2,500 (50% of the previous year’s total bill).
You pay your second payment on account for the 2018/19 tax year of £2,500 by 31st July 2019.
Your total 2018/19 tax bill is £7,000.
By 31st January 2020, you pay the remaining balance of £2,000 plus the first payment on account for the 2019/20 tax year of £3,500