Do I need to do a self assesment tax return?

Do I need to do a self assesment tax return?

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Discussion

mjb1

Original Poster:

2,556 posts

160 months

Wednesday 12th December 2018
quotequote all
I always thought that as a director of a limited company that I fell under self assessment rules, but I've just done a questionnaire on HMRC website (https://www.gov.uk/check-if-you-need-tax-return/), which is telling me that I don't have to do self assessment. All my income is PAYE, under 50k, no dividend, no CGT. Does this sound correct?

JulianPH

9,917 posts

115 months

Wednesday 12th December 2018
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mjb1 said:
I always thought that as a director of a limited company that I fell under self assessment rules, but I've just done a questionnaire on HMRC website (https://www.gov.uk/check-if-you-need-tax-return/), which is telling me that I don't have to do self assessment. All my income is PAYE, under 50k, no dividend, no CGT. Does this sound correct?
It does to me, if you have no other taxable income or gains and are not a higher rate taxpayer. The only other eventuality would be if HMRC issued you with a tax return notice. You would then have to submit it.

Eric could give you a definitive answer.

Eric Mc

122,053 posts

266 months

Wednesday 12th December 2018
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The general rule is that, if you have income that cannot be taxed correctly at source (such as a profits from a sole trade business or rental income as a landlord), then the only way you can declare that income so that it can be taxed correctly is through the self assessment system.

Being the director of a limited company does not automatically make you have to submit a self assessment tax return. If a director receives all of his income from his company in the form of salaries and Benefits in Kind, for example, the PAYE system should tax that income correctly and no self assessment would be necessary.

However, if the director also has income which is not taxed correctly at source - such as dividend income (as a shareholder) or interest received on a loan he has made to the company - or more complex matters such as share options etc, then he would need to complete a self assessment tax return.

HMRC advice can be confusing. In the past they were pretty adamant that directors did indeed have to submit a self assessment tax return which was never legally true as explained above.

mjb1

Original Poster:

2,556 posts

160 months

Wednesday 12th December 2018
quotequote all
Thanks both, that seems to confirm what I'm seeing elsewhere. HMRC have issued me with a tax return notice (as they have every year since I formed the limited company), and I've always submitted them before. For a couple of years I also had a self employed sideline, so those years SA was definitely required.

After answering the questions on the above HMRC link, there is then an option to 'request removal from self assessment', which if successful should negate their previous tax return notice. Going to give that a try.

Eric Mc

122,053 posts

266 months

Wednesday 12th December 2018
quotequote all
Yes - you can contact HMRC and request that Self Assessment be cancelled on the basis that your circumstances do not dictate that you need to complete one. Being a director on its own is not sufficient reason to have to complete self assessment tax returns.

HOWEVER, completing an SA return is not all bad as it can be a useful "tax health check exercise" - to ensure that your tax affairs are correct.

ellroy

7,038 posts

226 months

Wednesday 12th December 2018
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OP, just a word to the wise.

I was told there was no need to fill in a return anymore by HMRC, who then decided a year or so later that in fact they did want one.

No problem at all, apart from the fact they didn't let me know in any way shape or form, they just sent me out a fine for a late return. Luckily i'd kept the original letter and after a few calls managed to get them to see sense. So if you have something from them saying don't bother hang on to it for future reference!

cidersurfer

74 posts

216 months

Wednesday 12th December 2018
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Eric Mc said:
... interest received on a loan he has made to the company...
Eric, would you please offer some guidance as to what rate of interest is considered acceptable (to HMRC?) in today's marketplace? (We have been considering this with our accountant who at one point said we weren't entitled to any!)

Apologies for thread drift...

Eric Mc

122,053 posts

266 months

Thursday 13th December 2018
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Why?

Eric Mc

122,053 posts

266 months

Thursday 13th December 2018
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cidersurfer said:
Eric, would you please offer some guidance as to what rate of interest is considered acceptable (to HMRC?) in today's marketplace? (We have been considering this with our accountant who at one point said we weren't entitled to any!)

Apologies for thread drift...
HMRC has no opinion on this. Any rate of interest is acceptable from zero to whatever number you like - as long as the taxpayer returns the interest they received on their Self Assessment tax return as "Interest Income".

They could get twitchy if they thought that the interest that was being paid to the director was an alternative to salary (they don't like disguised employment income).

GT03ROB

13,268 posts

222 months

Thursday 13th December 2018
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Eric Mc said:
Why?
Maybe he earns north of 100k?

Eric Mc

122,053 posts

266 months

Thursday 13th December 2018
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GT03ROB said:
Eric Mc said:
Why?
Maybe he earns north of 100k?
As I said earlier, NORMALLY, if a person's income is entirely dealt with under the PAYE system, there is usually no need to complete a Self Assessment tax return. Indeed, HMRC would dearly love to scrap the entire Self Assessment system - and that was their plan until July 2017. Tax year 2018/19 was supposed to be the first year after the death of SA. That plan was scrapped after the 2017 General Election.

However, the PAYE system finds it hard to cope with people who may be taxed entirely under PAYE but have added complications - such as high levels of earnings, need to pay back Child Benefit, pay into personal pensions etc etc.

Taita

7,609 posts

204 months

Thursday 13th December 2018
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I'm PAYE (higher rate but nothing mental) but get a cheque from some share dividends each month. Circa 8-12quid.

I'd guess that needs declaring as income somewhere? Guessing I need a SA?

GT03ROB

13,268 posts

222 months

Thursday 13th December 2018
quotequote all
Eric Mc said:
As I said earlier, NORMALLY, if a person's income is entirely dealt with under the PAYE system, there is usually no need to complete a Self Assessment tax return. Indeed, HMRC would dearly love to scrap the entire Self Assessment system - and that was their plan until July 2017. Tax year 2018/19 was supposed to be the first year after the death of SA. That plan was scrapped after the 2017 General Election.

However, the PAYE system finds it hard to cope with people who may be taxed entirely under PAYE but have added complications - such as high levels of earnings, need to pay back Child Benefit, pay into personal pensions etc etc.
Well they shouldn't keep frikking with the system to add all these complications that PAYE can't cope with! Unfortunately my employer is just as bad, so I signed mine off yesterday to confirm I'm still non-res & they can claim a wadge of overpaid tax back.

Eric Mc

122,053 posts

266 months

Thursday 13th December 2018
quotequote all
GT03ROB said:
Well they shouldn't keep frikking with the system to add all these complications that PAYE can't cope with! Unfortunately my employer is just as bad, so I signed mine off yesterday to confirm I'm still non-res & they can claim a wadge of overpaid tax back.
Agreed - but tax never stays still and it will always get more complex, not less.

Eric Mc

122,053 posts

266 months

Thursday 13th December 2018
quotequote all
Taita said:
I'm PAYE (higher rate but nothing mental) but get a cheque from some share dividends each month. Circa 8-12quid.

I'd guess that needs declaring as income somewhere? Guessing I need a SA?
Yep - you need to notify HMRC of your dividend income - they have no way of knowing you had this income otherwise. That means submitting an SA tax return.

You MIGHT be able to notify HMRC by phone or using your access to your Digital Tax Account (this is what HMRC wanted under their "full strength Making Tax Digital scheme). If you can do that, you could escape the need to complete the tax return. HMRC would collect the additional tax due on the dividends by fiddling with your PAYE tax code - which no doubt HMRC will not get right.

Frankly, I consider competing an SA tax return to be the lesser of the two evils.

caiss4

1,884 posts

198 months

Thursday 13th December 2018
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Eric Mc said:
Frankly, I consider competing an SA tax return to be the lesser of the two evils.
Quite agree. I've completed tax returns since the mid-80's even though, until recently, I was exclusively PAYE. In the 80's the reason was that being in export sales I could reclaim part/all my tax back if I was outside the UK for 90 days or more (not sure exactly and the rules did change until it was scrapped entirely by the late 80's).

What is notable though were the number of tax returns that resulted in refunds owing to tax code errors.

Eric Mc

122,053 posts

266 months

Thursday 13th December 2018
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anonymous said:
[redacted]
Not good enough. They must have a reason why they ask you to. Sometimes, it's simply because you needed to in the past and they just keep issuing the annual SA letter to you out of inertia. Why not call them and ask them why they think you need to be completing a tax return.

There may be a valid reason - but it would be good to know what it is.