What Is Self Assessment?
Self Assessment is HMRC's system for collecting income tax from people whose tax cannot be fully collected automatically through the Pay As You Earn (PAYE) system. Unlike employees whose employer deducts income tax and National Insurance automatically from each payslip, self-employed workers, company directors, landlords, and those with complex financial affairs must calculate and declare their own tax liability each year by completing a Self Assessment tax return.
Every year, around 12 million people in the UK complete a Self Assessment return. The process involves declaring all taxable income received during the tax year (6 April to 5 April), claiming any allowable expenses and reliefs, and calculating the resulting tax liability. The return is filed with HMRC — either on paper or online — and any tax owed is paid by the filing deadline.
While the process has a reputation for complexity, for many people with straightforward affairs (single source of self-employment income, no foreign income, no significant capital gains) HMRC's online system is intuitive and guided. The challenge comes for those with multiple income streams, property portfolios, shares and investments, or business expenses to itemise.
Who Needs to File a Self Assessment Tax Return?
HMRC requires you to file a Self Assessment return if any of the following apply to you during the tax year:
| Reason to File | Threshold / Condition |
|---|---|
| Self-employed (sole trader) | Gross trading income above £1,000 |
| Company director | Most directors (unless income solely PAYE) |
| High earner | Income over £100,000 |
| Rental income | Gross rental income above £2,500 untaxed |
| Investment income | Untaxed income (dividends, interest) above £2,500 |
| Foreign income | Any untaxed income from abroad |
| Business partnership | If you are a partner |
| Capital gains | Gains above £3,000 annual exempt amount (2025/26) |
| High Income Child Benefit | Income over £60,000 (charge applies) |
| HMRC notice to file | HMRC has specifically asked you to file |
| Pension contributions | Annual allowance exceeded, or claiming higher-rate relief |
| Untaxed state pension | State pension exceeds Personal Allowance |
If none of the above apply and all your income is taxed through PAYE, you generally do not need to file a Self Assessment return — your employer handles your tax automatically. However, even if not legally required, you may want to file voluntarily if you have unused allowances, Gift Aid donations, or pension contributions that would generate a tax repayment.
Key Self Assessment Deadlines 2025-26
Missing a Self Assessment deadline triggers automatic penalties — even if you owe no tax. Mark these dates in your calendar:
| Deadline | Date | What It Is |
|---|---|---|
| Register for Self Assessment | 5 October 2026 | Deadline to register if new to SA for 2025-26 |
| Paper tax return | 31 October 2026 | Deadline to file a paper return |
| Online tax return | 31 January 2027 | Deadline to file online and pay tax owed |
| First payment on account | 31 January 2027 | 50% advance payment toward 2026-27 bill |
| Second payment on account | 31 July 2027 | Remaining 50% advance payment |
| Balancing payment | 31 January 2027 | Top-up payment if actual tax exceeds payments on account |
How to Register for Self Assessment
If this is your first time needing to file a Self Assessment return, you must register with HMRC before you can file. The registration process differs slightly depending on your situation:
- Create a Government Gateway account at Gov.uk if you do not already have one. You will need your National Insurance number and a valid email address.
- Select your reason for registering — sole trader, partner in a partnership, not self-employed (e.g., director or landlord). This determines the relevant registration form.
- Complete the online registration (SA1 form for most non-self-employed cases; CWF1 for sole traders/self-employed). Provide your personal details, start date, and nature of income.
- Wait for your Unique Taxpayer Reference (UTR) — this 10-digit number arrives by post within 10 working days (up to 21 days if you are abroad). Keep it safe; you will need it for all future dealings with HMRC.
- Activate your online account using the activation code HMRC sends separately, then log in and begin completing your return after 6 April following the relevant tax year end.
What to Include in Your Self Assessment Return
The Self Assessment return (form SA100, with supplementary pages as required) asks you to declare all taxable income and gains from the tax year. The main categories are:
Employment Income
Even if your main income is from PAYE employment, you may still need to complete a Self Assessment return if you earn over £100,000, have multiple jobs, or your tax code is wrong. Employment income is typically pre-populated from HMRC's records if you use the online service — always check these figures against your P60 or P45.
Self-Employment Income
Report your business turnover (total sales/income) and allowable business expenses. HMRC calculates your taxable profit (turnover minus expenses) from this information. If your turnover is below £85,000, you can use simplified reporting — just reporting income and total expenses rather than itemising every category.
Property Income
Declare rental income from UK property. You can deduct allowable expenses such as mortgage interest (limited to 20% tax credit for residential landlords), letting agent fees, insurance, maintenance and repairs, and accountant fees. The Rent-a-Room Scheme allows up to £7,500/year tax-free from lodgers in your own home.
Savings and Investment Income
Report interest above the Personal Savings Allowance (£500 for higher-rate taxpayers, £1,000 for basic-rate taxpayers), dividends above the Dividend Allowance (£500 in 2025/26), and income from ISAs (which are tax-free and do not need to be declared).
Capital Gains
Report gains from selling assets such as shares, second properties, or business assets where the gain exceeds the Annual Exempt Amount (£3,000 in 2025/26). Capital Gains Tax rates are 18% or 24% on residential property and 10% or 20% on other assets, depending on your overall income.
Allowable Expenses: What Can You Claim?
Self-employed individuals can reduce their taxable profit by claiming expenses that are wholly and exclusively for business purposes. Key categories include:
| Expense Category | Examples | Notes |
|---|---|---|
| Office costs | Stationery, postage, printing, software subscriptions | Fully deductible if exclusively for business |
| Travel and transport | Fuel, parking, train fares, business mileage | Commuting is NOT deductible |
| Stock and materials | Raw materials, goods for resale | Cost of goods sold is fully deductible |
| Financial costs | Bank charges, accountant fees, business insurance | Personal insurance not deductible |
| Staff costs | Employee wages, subcontractor fees, employer NI | Cannot claim your own wages as self-employed |
| Marketing | Advertising, website hosting, design costs | Fully deductible |
| Professional fees | Solicitor, accountant, professional subscriptions | Must relate to business income |
| Home as office | Proportion of rent, utilities, broadband | Simplified rate: £10–26/month depending on hours |
| Equipment | Computer, tools, machinery | Claim via Annual Investment Allowance or capital allowances |
| Business mileage (own car) | First 10,000 miles at 45p/mile, then 25p/mile | HMRC approved mileage rate |
Ways to Reduce Your Self Assessment Tax Bill
Before submitting your return, review these legitimate tax-reduction strategies:
1. Pension Contributions
Contributing to a registered pension scheme reduces your taxable income. Higher-rate (40%) and additional-rate (45%) taxpayers can reclaim the extra relief through Self Assessment. For example, a £10,000 gross pension contribution from a 40% taxpayer saves £4,000 in tax (£2,000 claimed at source, £2,000 via Self Assessment).
2. Gift Aid Donations
Donations to charity via Gift Aid extend the basic-rate band, effectively reducing higher-rate tax. A £100 donation with Gift Aid costs the higher-rate taxpayer only £60 after tax relief.
3. Marriage Allowance
If one spouse earns below £12,570 (the Personal Allowance) and the other is a basic-rate taxpayer, the lower earner can transfer £1,260 of their allowance, saving up to £252 per year in tax. Backdating for up to four years is also possible.
4. Annual Investment Allowance (AIA)
Self-employed individuals and businesses can deduct the full cost of qualifying plant and machinery (computers, vehicles used for business, tools, equipment) in the year of purchase, up to £1 million per year.
5. Timing Income and Expenses
If you are close to a tax threshold (e.g., the £100,000 adjusted net income level where the Personal Allowance tapers), consider whether deferring income or accelerating pension contributions could keep you below the threshold.
Self Assessment Penalties: What They Cost
| Offence | Penalty |
|---|---|
| Filing 1 day late | £100 fixed penalty (automatic) |
| Filing 3 months late | Additional £10/day, up to 90 days (max £900) |
| Filing 6 months late | Greater of £300 or 5% of tax due |
| Filing 12 months late | Greater of £300 or further 5% of tax due (100% if deliberate) |
| Payment 30 days late | 5% of unpaid tax |
| Payment 6 months late | Further 5% of unpaid tax |
| Payment 12 months late | Further 5% of unpaid tax |
| Late payment interest | Bank of England base rate + 2.5% (currently ~7.75%) |
Frequently Asked Questions
You must file a Self Assessment return if you are self-employed with trading income above £1,000, a company director, earn over £100,000, have untaxed income above £2,500, have foreign income, are a business partner, have capital gains above £3,000, claim Child Benefit while earning over £60,000, or if HMRC has issued a notice to file one.
Register by 5 October 2026. Paper returns by 31 October 2026. Online returns and payment of tax owed by 31 January 2027. First payment on account also due 31 January 2027. Second payment on account due 31 July 2027.
Visit Gov.uk, create or log into your Government Gateway account, and complete the online SA1 registration form (or CWF1 if self-employed). You will receive a Unique Taxpayer Reference (UTR) by post within 10 working days. Register by 5 October following the end of the tax year you first need to file for.
Self-employed individuals can claim expenses wholly and exclusively for business: office costs, business travel (not commuting), stock, financial costs, staff wages, marketing, professional fees, and business use of your home. Equipment can be claimed via the Annual Investment Allowance up to £1 million per year. Employees generally cannot claim expenses unless they are unreimbursed and required to do the job.
A £100 fixed penalty applies immediately after the deadline even if you owe no tax. After 3 months, £10/day is added (up to 90 days). After 6 months, an additional penalty of the greater of £300 or 5% of tax due. After 12 months, a further penalty of the same amount. HMRC also charges interest on late payments at Bank of England base rate plus 2.5%.
Payments on account are advance payments toward your next year's bill if your tax liability exceeds £1,000 and less than 80% is collected at source. Two payments of 50% each are made — one on 31 January during the tax year and one on 31 July after. You can apply to reduce them if your income has fallen, but will owe interest if reduced below the actual amount.
Many people with straightforward affairs complete their own return via HMRC's online guided system. An accountant adds value for complex situations: multiple income streams, foreign income, capital gains, business structures. Accountant fees are tax-deductible for self-employed individuals. Costs typically range from £150 to £500+ for a straightforward return.