Welcome to the World of Self-Assessment!

Hello! If you’ve ever wondered how the UK government actually collects tax from millions of people and companies without checking every single bank account every day, you’re in the right place. This chapter is all about the systems for self-assessment and the making of returns—the framework where the burden is on the taxpayer (both individuals and companies) to declare their income or profits accurately to HM Revenue & Customs (HMRC).

HMRC operates on the principle: "You tell us how much you earned and calculate what you owe, and we have powers to check whether you are right." Let's break down the rules, filing deadlines, payment mechanisms, and penalties into bite-sized pieces for both individuals and companies.

1. Self-Assessment for Individuals

Not everyone needs to fill out an individual tax return. If an individual is an employee and all tax is collected at source via PAYE, they generally do not need to file. However, an individual must notify HMRC of chargeability to tax if they have untaxed income (e.g. self-employment trading profits, rental income, or untaxed savings/dividend income) or chargeable capital gains.

Notification Deadline: By 5 October following the end of the tax year. For example, for a new source of income arising in the 2025-26 tax year (ending 5 April 2026), HMRC must be notified by 5 October 2026.

Filing Deadlines for Individuals

The UK individual tax year runs from 6 April to 5 April. Returns can be submitted in one of two formats:

• Paper Return: Must be submitted by 31 October following the tax year (e.g. 31 October 2026 for 2025-26).
• Electronic (Online) Return: Must be submitted by 31 January following the tax year (e.g. 31 January 2027 for 2025-26).
• If HMRC issues a notice to file after 31 July following the tax year, the deadline is three months from the date the notice was given.

Payments on Account (POA) and Balancing Payments

Individuals pay their income tax and Class 4 NIC through payments on account unless their relevant tax liability from the previous year was under £1,000, or at least 80% of their liability was collected at source via PAYE.

Where required, payments are structured as follows:

• 1st Payment on Account: Due on 31 January during the tax year (e.g. 31 January 2026 for 2025-26).
• 2nd Payment on Account: Due on 31 July following the tax year (e.g. 31 July 2026 for 2025-26).
• Balancing Payment: Due on 31 January following the tax year (e.g. 31 January 2027 for 2025-26). Capital gains tax is also due on this date.

Each POA is calculated as: \( \text{POA} = 0.5 \times (\text{Income Tax} + \text{Class 4 NIC from the prior year}) \).

2. Self-Assessment for Companies (CTSA)

Companies are subject to Corporation Tax Self-Assessment (CTSA) and must complete and file a company tax return (Form CT600).

Filing Deadlines and iXBRL

• Filing Deadline: A company must file its return within 12 months of the end of its accounting period (or within three months of receiving a notice to file, if later).
• Electronic Filing Format: Company tax returns, accounts, and tax computations must be submitted online using iXBRL (inline eXtensible Business Reporting Language), a standardised computer-readable reporting tag system.

Due Dates for Corporation Tax Payments

Corporation tax payment due dates depend on whether the company is classified as large:

• Small and Medium-Sized Companies: The full liability is due 9 months and 1 day after the end of the accounting period (e.g. for a 12-month accounting period ending 31 December 2025, payment is due on 1 October 2026).
• Large Companies: A company is large if its augmented profits exceed the profit threshold (\(£1,500,000\), divided by \(1 + N\) where \(N\) is the number of associated companies). Large companies pay corporation tax in four quarterly instalments based on their estimated current-year liability. For a 12-month accounting period, the instalments are due on the 14th day of months 7, 10, 13, and 16 following the start of the period.

3. Amendments, Claims, and Compliance Checks

Amending Returns and Making Claims

• Return Amendments: Both individuals and companies may amend their tax returns within 12 months of the statutory filing date.
• Error or Overpayment Relief: A claim for repayment of tax overpaid due to an error or mistake must be made within 4 years from the end of the relevant tax year (for individuals) or accounting period (for companies).

HMRC Compliance Checks (Enquiries)

HMRC may open a compliance check into any return:

• If the return was submitted on or before the statutory filing deadline, HMRC must give written notice of the enquiry within 12 months of the actual date the return was filed.
• If the return was filed late, HMRC has until the quarter day following the first anniversary of the filing date (quarter days being 31 January, 30 April, 31 July, and 31 October).
• Determinations: If a taxpayer fails to submit a return, HMRC can issue a determination estimating the tax due. A determination cannot be appealed against directly; it can only be displaced by filing the actual tax return.

Appeals and Tribunals

If a taxpayer disagrees with an HMRC decision or closure notice, they must appeal in writing to HMRC within 30 days of the notice. If the dispute cannot be settled with HMRC, the appeal is heard by the independent tax tribunal system:

• First-tier Tribunal: Hears appeals from taxpayers regarding facts and tax law determinations.
• Upper Tribunal: Hears appeals against First-tier Tribunal decisions on points of law only.

4. Records to Retain

Taxpayers must retain sufficient books and records to make a complete and correct return:

• Individuals with a Business / Self-Employed: Must keep records until 5 years after the 31 January following the tax year.
• Non-Business Individuals: Must keep records for 1 year after the 31 January following the tax year.
• Companies: Must retain records for 6 years from the end of the relevant accounting period.

5. Interest and Penalties

Late Filing Penalties (Individuals)

• 1 day late: Fixed penalty of £100.
• 3 months late: Daily penalty of £10 per day (up to a maximum of 90 days, or £900).
• 6 months late: Additional penalty of 5% of the tax liability or £300 (whichever is greater).
• 12 months late: Another 5% of the tax liability or £300 (whichever is greater).

Late Payment Penalties and Interest

• Late Payment Penalties (Individuals): 5% of unpaid tax is charged at 30 days late, another 5% at 6 months late, and another 5% at 12 months late.
• Interest: HMRC charges late payment interest on any unpaid tax from the due date until the date of payment. Conversely, HMRC pays repayment interest where tax is refunded to the taxpayer.

Quick Review Box

1. Individual Filing: 31 October (paper), 31 January (online).
2. Individual Payment: POAs on 31 January and 31 July (50% each), balancing payment on 31 January.
3. Company Filing: 12 months after the end of the accounting period, submitted in iXBRL format.
4. Company Payment: 9 months and 1 day after the period ends (small/medium) or quarterly instalments (large).
5. Records: 1 year post-filing date (non-business individual), 5 years post-filing date (business individual), 6 years post-period (companies).
6. Appeals: Within 30 days to HMRC, then to the First-tier Tribunal.