What is Self Assessment?

Who has to file, and when?

Anyone with income that is not taxed at source: sole traders, partners, landlords, company directors taking dividends, and employees with significant untaxed income or a high enough salary to trigger it. HMRC's checker on gov.uk gives a definitive answer for an individual case.

The return covers the tax year, 6 April to 5 April. Online returns are due by 31 January following the end of the tax year, paper returns by 31 October. The tax is also due on 31 January, along with any first payment on account for the year already under way.

The name is literal: you assess yourself. HMRC does not check every figure when the return is filed; it accepts it, and reserves the right to enquire later. That is why the records behind the return matter more than the return itself.

A worked example

A self-employed plumber's tax year: invoices raised of £58,000 and allowable expenses of £16,000 — materials, van costs, insurance, phone, tools. His taxable profit is £42,000. Income tax and Class 4 National Insurance are calculated on that profit at the current rates and allowances, which he does not need to know because the return works it out; suppose it comes to £8,400.

He files online in early December, giving himself time to check it, and pays the £8,400 on 31 January. Because his bill is above the payments on account threshold, he also pays £4,200 that day towards next year, and another £4,200 on 31 July. The money for all three should have been set aside through the year, not found in January.

What does Making Tax Digital change?

Under Making Tax Digital for Income Tax, sole traders and landlords above an income threshold keep digital records and send quarterly updates to HMRC through software, with a final declaration replacing the return. The thresholds and the years they apply from are on gov.uk. The tax itself, and the 31 January payment date, do not change.