Self assessment tax return: Do you need to do one?

Self assessment tax return angst usually strikes in January, but there are some people who need to get their skates on well before that, because if you need to do a tax return for the first time this year, you must register for self assessment before the deadline on 5 October.

We usually think about tax returns as being for people who work for themselves, and this does make up a big chunk of those who need to do self assessment. But there are other reasons why you might need to do this, so it’s worth knowing some of the most common ones.

Higher rate taxpayers who pay into a personal pension

If this is you, you’ll get 20% tax relief on money you pay in, but you’ll need to do a tax return to claim the rest.

You might also need to do one if you are in a workplace pension, but it will depend on the scheme. Some are what’s known as ‘net pay’ pensions, where your employer makes contributions before tax, so full tax relief is automatic. The same is true if you have a salary sacrifice arrangement.

However, some are ‘relief at source’ pensions, where you get 20% tax relief and will need to claim the rest.

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The easiest way to find out what kind of scheme you’re in is to ask your employer.

If you get child benefit and you or your partner earn between £50,000 and £60,000

If this sounds like you, you might need to do a tax return to pay the high income child benefit tax charge.

Under the charge, you have to repay 1% of the benefit for every £100 you earn over the threshold. You don’t need to calculate this, just input the details and the maths will be done for you.

Once you earn over £60,000 you’ll need to repay all your child benefit, so most people find it easier to claim it but tell HMRC not to make any payments — which saves the bother of repayment but means you still get national insurance credits, which count towards your state pension.

You make more than £6,000 in capital gains by selling or giving away something that has risen in value

You will have to do a self assessment tax return if you make more than £6,000 in capital gains by selling or giving away something that has risen in value to anyone other than a spouse or civil partner.

If you made the profit on a second property, you’ll need to use the ‘real time’ system instead — and pay the tax more quickly. You can technically use that for any capital gain if you’d rather pay the tax faster.

You have a side hustle

You might also need to do a tax return if you have a side hustle. You have a £1,000 trading allowance, which can cover things like selling through Ebay, but any more than this and you normally need to do a tax return.

Plus you might need one if you rent out a furnished room in your home — including Airbnb. You have a rent-a-room allowance of £7,500, but if you make more than that, you need to register for self-assessment.

Rents have gone through the roof recently, so there’s a chance you put the rent up over this threshold without considering the implications.

You’re a higher rate taxpayer who gives money to charity

If this is you, you may also want to do a self assessment. You will automatically get 20% gift aid, but you can claim back the rest of the tax relief through a self assessment claim.

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However, if this is your only reason for completing self assessment, there are alternatives. You can fill in a separate form to make the claim, or contact HMRC and ask them to amend your tax code instead.

There are also a host of other less common reasons for doing a return — from investing in a VCT to making more than £10,000 in savings or dividends, earning income overseas, or even if you’re working as a vicar, so if in doubt, it’s worth checking the gov.uk website.

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