Self Assessment explained
Self assessment was introduced in 1998 as the way taxpayers would inform HM Revenue of the income they have received during a tax year. The phrase self assessment relates to the fact that it is now the taxpayers responsibility to inform HMRC about their tax affairs during the year concerned.
Most people pay tax on their earnings by having it deducted from their wages by their employer. If you’re self employed though or rent out a property then this wont be possible. You will therefore need to complete a tax return and submit it to HMRC giving details of your income and expenditure.
How does self-assessment work?
In order to obtain a tax return you need to inform HMRC that you are now receiving an income that isn’t being taxed at source (such as income from self employment or property rental). They will then issue you with a tax return for the year you began receiving this income.
For example if you informed them in August 2008 that you were starting self employment then your first tax year for self-assesment would be the 2008/09 tax year. This return would need to be completed showing ALL your income sources (even if already taxed) by 31st January 2010.
Will they just send me a tax return?
If you have just become self employed or started to receive income from land and property then it’s your responsibility to inform the tax man about this change in your circumstances. There is a requirement to inform HMRC of this within 3 months of becoming self-employed. If you don't they could fine you £100.
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