PAYE tax Self-assessment tax

While the majority of income tax is collected via PAYE, around 10 million people each year make a self-assessment tax return and pay tax in two large sums, rather than monthly instalments.

This guide explains who needs to pay tax this way and what you need to do. 

Who pays self-assessment tax?

Self-assessment is used to collect tax from the self-employed, paying income tax on their profits. It is also used if you’re a business partner or a director of a limited company. You'll also need to fill in a tax return if:

  • You're an employee or pensioner with an annual income of £100,000 or more;
  • You have a pre-tax investment income of £10,000 or more;
  • You're a 'name' at the Lloyd's of London insurance market;
  • You're a minister of religion;
  • You're a trustee or representative of someone who has died.

You'll usually also be sent a tax return if:

  • You have untaxed income – from investment, land or property, or from overseas
  • You make capital gains above the annual exempt amount (£11,100 for 2016-17)
  • You were required to fill in a tax return last year
  • You're a pensioner who gets reduced age-related allowance, though you may be sent a special short version which requires fewer details.

Go further: Tax returns - read our in-depth guide to filling out your tax return

PAYE and self-assessment

It is possible to pay tax via PAYE and also complete a self-assessment tax return. This is common if you receive a private pension and also if you receive investment income.

If you are an employee but also self-employed (running a business part-time) you might also be required make a self-assessment tax return. You are expected to show details of your employment, earnings and tax deducted via PAYE.

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