Debunking the self assessment myths

There are plenty of myths surrounding the self assessment system in the UK. Who does and doesn't need to file a return, what HMRC will and won't do, when and how to pay are all commonly misunderstood. However, it is important to know your obligations under self assessment and avoid penalties from the tax authority. Here, we take a look at five of the most common self assessment myths.

Myth 1: 'HMRC hasn't been in touch, so I don't need to file a tax return.'

Reality: It's the individual's responsibility to determine if they need to complete a tax return for the 2023/24 tax year. There are many reasons why someone might need to register for self assessment and file a return, including if they:

• are newly self-employed and have earned gross income over £1,000
• earned below £1,000 and wish to pay Class 2 National Insurance contributions (NICs) voluntarily to protect their entitlement to state pension and certain benefits
• are a new partner in a business partnership
• have received any untaxed income over £2,500
• receive Child Benefit payments and need to pay the High Income Child Benefit Charge because they or their partner earned more than £50,000.

HMRC provides an online tool which can be used to check if you need to file a self assessment return. 

Once registered for self assessment, taxpayers will receive a Unique Taxpayer Reference, which they will need when completing their return and paying any tax that may be due.

Myth 2: 'I have to pay the tax at the same time as filing my return.'

Reality: False. Even if someone files their return today, the deadline for taxpayers to pay any tax owed for the 2023/24 tax year is 31 January 2025. Taxpayers may also be able to set up a Budget Payment Plan to help spread the cost of their next self assessment tax bill, by making weekly or monthly direct debit payments towards it in advance.

Myth 3: 'I don't owe any tax, so I don't need to file a return.'

Reality: Even if a taxpayer doesn't owe tax, they may still need to file a self assessment return to claim a tax refund, claim tax relief on business expenses, charitable donations, pension contributions, or to pay voluntary Class 2 NICs to protect their entitlement to certain benefits and the state pension.

Myth 4: 'HMRC will take me out of self assessment if I no longer need to file a return.'

Reality: It is important taxpayers tell HMRC if they have either stopped being self-employed or they don't need to fill in a return, particularly if they have received a notice to file.

If they don't, HMRC will keep writing to them to remind them to file their return and may charge a penalty.

Customers may not need to complete a tax return if they have stopped renting out property, no longer need to pay the High Income Child Benefit Charge, or their income has dropped below the £150,000 threshold and have no other reason to complete a tax return.

Myth 5: 'HMRC has launched a crackdown on people selling their possessions online and now I'll have to file a self assessment return and pay tax on the items I sold after clearing out the attic.'

Reality: Despite speculation online earlier this year, tax rules have not changed in this area. If someone has sold old clothes, books, CDs and other personal items through online marketplaces, they do not need to file a self assessment and pay income tax on the sales. HMRC's guidance on selling online and paying taxes can be found here.