You have just one day left to tell HMRC about any income you’ve earned from the past year that might be taxable – tomorrow, 5 October, is the deadline for registering to pay tax by self-assessment.
You must do this if you’ve received income over the past year that HRMC has not already taxed and you’ve never filed a tax return before.
We explain what you have to do to comply with tax rules, plus which income counts and how self-assessment tax works.
Deadline to report untaxed income
By 5 October, you need to alert HMRC to any income you’ve earned from the 2017-2018 tax year that you haven’t already paid tax on by registering for self-assessment.
If the untaxed income you earned is less than £2,500, and you already pay tax through PAYE, you can ask HMRC to deduct any tax from your salary or pension payments by changing your tax code. You can do this by calling 0300 200 3300.
But if you earned more than £2,500, you’ll need to register to pay via a self-assessment tax return. To register, you can either phone HMRC on 0300 200 3300 or submit a form online.
If this is the first year you will submit a return, you’ll be sent a letter with your Unique Taxpayer Registration number, which you can then use to create a new account and enrol for self-assessment services.
If you’ve previously paid via self-assessment, then you won’t need to register again and can fill in your self-assessment tax return as normal by 31 January (if filing online).
You can fill in tax returns for up to four years prior. Keep in mind that interest and penalties may be due for unpaid tax from previous years, but you could face harsher fines or even prosecution for failing to disclose taxable income at all.
If you’re self-self-employed and earned more than £1,000 in the tax year, you’ll need to register with HMRC. If you don’t do so by 5 October in your business’ second tax year, you may face a fine. You can register this by filling in a form online.
What income is taxable?
You need to report any untaxed income more than £2,500, but that doesn’t necessarily mean you will need to pay tax on the whole amount.
HMRC will apply the below allowances, which may bring down your bill.
Income: You can earn up to £11,500 in the 2017-18 tax year (and £11,850 in 2018-19) before paying income tax. For every £2 you earn above £100,000, you’ll lose £1 of your allowance.
Savings: If you have a large pot of savings, basic-rate taxpayers can earn £1,000 tax-free and higher-rate taxpayers can earn £500 via the personal savings allowance.
Investments: You were able to earn £5,000 in dividends from shares in 2017-18, but this dropped to £2,000 in 2018-19.
Trading allowance: Trading activities, such as selling goods on Ebay or small freelance services, can earn you £1,000 tax-free.
Property: You can earn up to £1,000 from your property, for example, by letting your home for an event. If you live in the property and take in a lodger, you can earn up to £7,500 under the Rent a Room scheme.
What if you were paid ‘under the table’?
In some cases, an employer may offer your wages ‘under the table’ or ‘cash-in-hand’, which means paying you without deducting income tax or National Insurance.
This income must be reported to HMRC, and you should consider reporting the employer for tax fraud.
If you accept this type of arrangement, you may have to pay the tax and National Insurance contributions yourself. You may also lose your entitlement to benefits, such as the state pension, and could jeopardise your employment rights.
There are penalties for deliberately avoiding tax, but if you contact HMRC yourself, it may consider your case more favourably.
Use Which?’s income tax calculator
Enter your income to find out how much tax you’ll pay in the 2018/19 tax year.
How is tax paid by self-assessment
Once you’ve filed your tax return, you’ll receive your bill for the last tax year.
You need to pay your self-assessment tax bill by midnight on 31 January to avoid a fine.
In some circumstances, if you owe more than £1,000, you’ll also be asked to make a payment towards next year’s bill û known as payment on account. You’ll pay in two instalments, one on 31 January and one on 31 July.
Say, for example, you owe £5,000 for the 2017-18 tax year. By 31 January 2019, you’ll need to pay £5,000 to settle the bill, then a further £2,500 towards your estimated 2018-2019 tax bill.
On 31 July, you’ll then pay a further £2,500. If your next bill is lower, you’ll get a refund, and if it’s higher, you’ll need to pay the balance on the following 31 January.
- Need help filing a tax return? You can use the Which? tax calculator to file online and send direct to HMRC.