6 unusual reasons you might need to file a 2022-23 tax return

If you're not self-employed, you might think the self-assessment process doesn't apply to you. But if you made any income in 2022-23 that you haven't already paid tax on, then you'll need to file a return by 31 January.

In November 2023, we surveyed 508 people who will be filing a self-assessment tax return for the 2022-23 tax year. We found that while a third were filing because they were self-employed, many had other reasons. One in five had to pay tax on savings interest and another one in 10 were child-benefit claimants.

Here, Which? reveals six lesser-known reasons for having to do a self-assessment tax return and explains what tax you could owe HMRC.

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1. Side hustles

Side hustles – jobs you take on in addition to your main job – have become a popular way to boost earnings. But whether it's selling handcrafted goods or delivering takeaways, any money you make counts as self-employed income and must be declared to the tax office.

You won't need to declare what you earn if you make less than £1,000 during a tax year (6 April-5 April), however, as it can be covered by the trading allowance. This applies to income from activities such as selling goods or services. Similarly, if your additional income is made from monetising your property in some way – such as renting out your driveway – the property allowance can cover up to £1,000.

If you earn more than this in a year, then it's your responsibility to declare your income to HMRC via a self-assessment tax return.

Anyone making money from a side hustle in 2024, in particular, should be aware of a change that came into force this month. In an attempt to crack down on people avoiding paying tax on second incomes, HMRC is now collecting data from online marketplaces and apps such as Airbnb and Uber, to see how much users make from sales or for providing services. 

However, it will only look at data on people earning more than the equivalent of €2,000 (currently around £1,700).

• Find out more: tax-free income and allowances

2. Gift Aid

When you donate to charity, the money is net of tax. Opting in to the Gift Aid scheme permits the charity to reclaim the 20% basic-rate tax from HMRC. 

But if you haven't paid enough tax during the year to cover the 20% the charity will reclaim, then you will need to pay the levy yourself.

Nevertheless, Gift Aid can be beneficial not only for the charity, but also for taxpayers earning a higher income.

That's because if you pay the higher-rate tax at 40% or the additional-rate at 45% and have made Gift Aid declarations when giving to charity, you can claim back the difference between the basic-tax rate and the rate you pay. So, higher-rate taxpayers could reclaim an extra 20%, and additional-rate taxpayers an extra 25%. 

• Find out more: tax relief on charitable donations

3. Child benefit

While child benefit isn't means-tested, you'll pay an additional tax charge if you or your partner has an annual income of more than £50,000. This is known as the 'high-income child benefit charge'.

This threshold is based on the individual income of the highest earner, and the tax charge must be paid by whoever earns the high salary via a self-assessment tax return. Our survey found that 9% of people filing a tax return for 2022-23 were doing so because they are claiming child benefit. 

The tax charge equates to 1% of the child benefit paid for every £100 of income over £50,000. All the benefit will be lost when a parent’s taxable income reaches £60,000.

For example, if your income is £56,000 and you have one child, you are earning £6,000 over the threshold and will need to pay 60% of your child benefit back as a tax charge, or £1,099.80.

• Find out more: child benefit explained

4. Savings interest

Savings rates have soared over the past two years and, while that's exciting, anyone who invested a large lump sum should check whether they owe any tax for 2022-23. Here's why. 

The personal savings allowance means basic-rate taxpayers can earn up to £1,000 a year in savings interest tax-free, while higher-rate taxpayers get a £500 limit. Additional-rate taxpayers have no personal savings allowance.

In a climate of low savings rates, these allowances have been more than enough for most savers not to worry about exceeding them. But as rates have risen higher, it's become more likely that you'll end up paying a chunk of your earnings to HMRC. Our survey revealed that 20% of people filing a return this year are doing so because they owe tax on savings interest or investment income.

Basic-rate taxpayers earning 6.2% AER on their savings, for example, could end up paying income tax on interest earned with £16,130. If you're a higher-rate taxpayer, the tipping point drops to just £8,065.

If you're paying your tax using self-assessment, then it's your job to report your savings income as part of your tax return.

5. Pension contributions

As with savings interest, the government puts a limit on the amount of pension contributions you can earn tax relief on. This is called the pensions annual allowance and it's set at 100% of your income or £40,000 – whichever is lower. This means that any pension contributions you make over the limit will be subject to income tax at the highest rate you pay. 

If you exceed the annual allowance in a year, you won't receive tax relief on any contributions you paid that exceed the limit, and you'll be faced with an annual allowance charge. This charge is added to the rest of your taxable income for the year to work out your overall tax liability.

You'll need to fill out a self-assessment tax return to detail how much of your pension contributions exceed the annual allowance and work out how much is due. 

However, you can carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during that time.

• Find out more: pension tax relief explained

6. Income from a lodger

If you receive rent from a lodger, you may need to complete a tax return. Under HMRC's 'rent-a-room' relief scheme, individuals can make up to £7,500, or £3,750 each if they share income from the property with someone else. But if you end up earning more than that allowance from your tenant, then you'll need to pay tax on the extra income.

Remember, the income limit covers everything you charge your tenants as part of the rental service – so if you charge them for cleaning, meals or laundry you'll need to count these fees, too. 

There are two ways to pay this tax through self-assessment. The first is to pay tax on your profits in the usual way for a rental business, ie by paying tax on your actual profit after deducting expenses. The second is to take the £7,500 tax-free allowances, and then pay income tax on any excess rent. If you choose the latter option, then you can't also claim expenses. 

• Find out more: what is the rent-a-room scheme?

Try the Which? tax calculator

If you need to file a tax return this year and need some support, try the Which? tax calculator.

It can help you get to grips with your tax liabilities and allowances. 

The tool provides clear, no-nonsense explanations about the different types of taxable income, plus suggestions for allowances you might have missed. You can even use it to file your return directly to HMRC.