Everything you need to know about your self-assessment tax return

With the deadline for filing your self-assessment tax return looming, it’s time to get your form in order, if you have not already submitted it. 

Filling in a tax return is nobody’s favourite activity. While it’s easy to procrastinate, as the 1.1mn UK taxpayers who missed last year’s deadline will attest to, if you do not submit your tax return on time you will be penalised.

You can make things easier for yourself by making a note of the options available to cut your tax bill and learning from the common mistakes people make. Getting up to speed with recent changes is also crucial.

Key changes for 2025

For starters don't forget the recent reduction of the capital gains tax (CGT) annual exempt amount and the dividend allowance. As a result “more people than usual may find themselves needing to report income that previously fell below these thresholds”, Rachel Griffin, tax and financial planning expert at Quilter, explains. For the tax year 2023-24 – the year you will be filling out your tax return for – the CGT allowance was £6,000, down from £12,300 in 2022-23. This decreased again to £3,000 for 2024-25. The dividend allowance also decreased from £2,000 in 2022-23 to £1,000 for 2023-24, and then again to £500 for 2024-25.

As a result of these cuts, even a small portfolio held outside the tax-free environment of an individual savings account (Isa) or a pension could trigger a tax bill. A £20,000 investment in a company yielding 5 per cent would take up the entirety of your 23/24 dividend allowance, and would be double this year's allowance.

Dividend schedules are decided by companies, so there is only so much you can do to time or minimise the bill. Gains are a little more flexible because you decide when to sell a holding; although you shouldn't let tax considerations have too much say in your investment decisions. If you have made gains above the CGT allowance, keep in mind that losses can also be reported and used to offset the gains, reducing your overall bill. You can also carry forward your losses to future tax years. But the CGT allowance itself can't be carried forward, so even if it's small, it's worth using every year if you plan to sell.

If you sell products on digital platforms such as eBay, you need to be aware of HMRC’s new digital platform reporting rules, which came into force in January 2024. These require digital platforms to report the income earned by their users to HMRC. The first reports are due to be sent to HMRC by 31 January 2025, and will cover part of the 2023-24 tax year. “It’s therefore very important that you accurately declare your income and gains earned via digital platforms as HMRC will now be able to cross check,” Elsa Littlewood, tax partner at BDO, says.

Who must complete a return 

If you worked as a sole trader and earned more than £1,000 during the tax year, or if you had a total taxable income over £150,000, you will need to complete a tax return. Partners in business partnerships, those who pay the high-income child benefit charge, and in some circumstances those who have to pay CGT also need to file one. Equally, if you received untaxed income from rental properties, investments, savings, dividends, commission, tips or foreign income during the tax year, you may also need to submit a tax return.

“You must also include details on any gains made from cryptocurrency disposals. This includes sale for fiat currency, such as pounds or dollars, using the cryptocurrency for purchases, or obtaining a different cryptocurrency,” Littlewood notes. 

If you are employed but are still required to complete a tax return, you must remember to include any company benefits you receive when reporting your income. This includes things such as company cars, and private dental or healthcare. In this scenario, your employer should provide you with a P11D form, which will include the details of the benefits you receive to input into the form. 

If you are confused about whether you need to complete a tax return, HMRC has two online tools to help you check. One draws on a general overview of the rules regarding who needs to submit a return, while the other is aimed specifically at those earning additional income through second jobs. “This could include those who sell goods online, rent out rooms or driveways, carry out private hire driving or food delivery, or people making money from online content,” Littlewood says. 

Cutting your tax bill

If you are facing a hefty tax bill, there are a few things you can do to cut it. First, include your pension contributions and charitable donations in your self-assessment. If you are a higher or additional-rate taxpayer, you can claim the difference between your top tax rate (40 or 45 per cent), and the basic rate of 20 per cent, on the total value of any of your Gift Aid donations or pension contributions. For Gift Aid, the 20 per cent basic rate of tax relief goes to the charity; for pension contributions, it is normally paid directly into your pension. But you must claim the rest.

Homeworkers can be eligible to claim tax relief for additional costs. “You can either claim tax relief on £6 a week or on the exact amount of extra costs you’ve incurred above the weekly amount, such as business phone calls or gas and electricity for your work area. But you’ll need evidence such as receipts, bills or contracts to claim the higher amount,” Littlewood explains. However, this only applies to workers who have to work from home due to conditions stipulated in their employment contract, rather than workers who have chosen to work from home as part of their employer’s flexible working arrangements. 

If you are married, you might be able to use the marriage allowance to reduce your combined tax bill, as Paul Slokan, associate director at RSM, advises. For this to apply, one of you must not pay income tax and the other needs to be a basic-rate taxpayer. In this circumstance, the spouse who does not pay income tax can transfer £1,260 of their personal allowance to their husband or wife. 

Also consider salary sacrifice. Your employer may offer this as an option for things such as your pension contributions or healthcare insurance. If you have used salary sacrifice in the last tax year, you will not need to add the contributions to your self-assessment tax return. It can also help you lower your adjusted net income to below the £100,000 threshold for free childcare or the £50,000 high-income child benefit charge threshold, protecting your entitlement to these benefits, Littlewood adds. 

Common mistakes 

Filing your tax return late can be costly. If you fail to meet the 31 January deadline, HMRC will issue you with a £100 late filing penalty. This will increase by £10 a day if you have not submitted your return after three months. You’ll also be charged a 5 per cent penalty on any outstanding tax from 1 March, with HMRC issuing further penalties if you are more than six months late. 

On top of this, “you may be charged late payment interest, which is currently at an eye-watering rate of 7.25 per cent – and due to go up by another 1.5 percentage points in April 2025,” Littlewood cautions. 

There are actually two deadlines. If you had been planning on filing a paper return, you’ve already missed your opportunity, as the deadline was midnight on 31 October 2024. Since the introduction of the two filing options, Slokan has witnessed several people caught out by this earlier deadline. If you’ve not submitted already, your only option is to file an online tax return. You have until midnight on 31 January to do this. 

Filing their return late is not the only mistake that people make. A common error is to forget to include additional income; so make sure you record any extra earnings you receive from rentals, side jobs and freelance work. If you’ve received that income in a foreign jurisdiction, it still needs to be included. Interest earned from overseas accounts, rental income from properties abroad or funds held in an overseas pension or trust must all be noted too. “If you are a UK tax resident, you will normally be subject to UK tax upon your worldwide income and assets, but you may be able to claim relief for tax paid overseas,” Littlewood says.

Relief is also available in the form of allowable expenses, an option people often forget about. If you are self-employed, you can deduct costs for things such as travel, advertising and office equipment from your taxable profit. However, keep in mind that allowable expenses do not include private purchases made with money from your business. You also cannot claim expenses if you have made use of your trading allowance, a £1,000 tax-free allowance for property or trading income. 

Slokan says that people also tend to forget to include their student and post-graduate loan deductions, or to report their employment income. Many assume that this will be caught by the PAYE system, but you still need to include it on your self-assessment form in order to calculate your total income. 

Finally, do double check your figures. Entering incorrect figures can lead to delays and penalties, but it's easy to do if you have not kept proper records. “It’s essential to double-check all the information on your return and keep detailed records of both income and expenses for at least five years to avoid any problems later,” Griffin says. 

Updating your tax return 

If you have made a mistake on your tax return, it is possible to correct it. You have 12 months from the self-assessment deadline to notify HMRC. HMRC will then update your bill depending on what you’ve reported. As a result, you may find that you have more tax to pay or that you are eligible to claim a refund. 

To make the request you can either update your online return or send a further paper return to HMRC. If you are updating your online submission, you will have to wait three days from when you filed your initial return to make the updates. For a paper return, you will need to clearly write “amendment” on each page of your new return, alongside your name and unique taxpayer reference. Guidance on this process is available on the gov.uk website.