Who has to file a tax return?

When does an individual need to file a tax return? In what circumstances do HMRC need to be notified that a tax return is required?

There are three circumstances in which you should file a UK Self Assessment (SA) return, where you:

  1. Have capital gains or income to report.
  2. Are sent a notice to file by HMRC.
  3. Wish to claim a refund or make a claim for relief.

Have capital gains or income to report

You must complete and file a Self Assessment return, without being asked to do so by HM Revenue & Customs (HMRC), if you are chargeable to tax.

An individual has an obligation to Notify HMRC of charge ability to tax if the following apply:

  • You have made a capital gain.
  • You have employment income that is not taxed under PAYE. 
  • You have dividend income and further tax to pay on that income.
  • You have any other untaxed income or are liable to tax at higher rates. E.g.
    • You have unreported taxable employment benefits.
    • You are in receipt of income in excess of £100,000 and this restricts your personal allowance.
    • You have income from self-employment or form a partnership.
    • You receive an untaxed rental income.
    • You receive foreign income*.
    • You are a non-resident landlord receiving rental income.
    • You are a member of an unauthorised collective investment scheme.
    • You are liable to the higher income child benefit charge.

Rental income 

The first £1,000 of your income from property rental is covered by the Property allowance.

Are sent a notice to file by HMRC

HMRC may send you a notice to file a tax return, and then you must do so.

If you have received a notice to file do not ignore it, even if you have no income to report. Having received a notice to file, HMRC will expect a return and you will receive a Late filing penalty if you fail to submit one or fail to get HMRC to withdraw the notice.

Directors only:

  • HMRC generally sets up a Self Assessment record for a new director once a company is formed. Information is provided either via Companies House or subsequently. 
  • If you are a non-resident director of a UK company HMRC will generally request that you file a return every year even if you draw no remuneration.
  • You do not automatically require a PAYE scheme. This is only necessary if you are paying remuneration subject to PAYE, or your employer provides employment benefits or pays you expenses of employment.
  • If, as a director, your only earnings are through PAYE, HMRC has updated their self-assessment Guidance to state that there is no need to file a tax return. This can also be extended in certain circumstances where other income from interest or dividends is less than £10,000 (as the tax can be collected through PAYE also).

Wish to claim a refund or make a claim for relief

You may register for Self Assessment and file a tax return in order to:

  • Claim a relief or allowance that must be made on a return.
  • Claim employment expenses or allowances not received via your employer or PAYE coding notice.
  • Notify your residence status or domicile.

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