Self Assessment

What Self Assessment actually is

Self Assessment is exactly what it sounds like: you assess your own tax. Instead of an employer doing the maths for you through PAYE, you tell HMRC what you earned, what you spent, and how much tax you owe. Then you pay it.

HMRC doesn't check every return in detail. They trust you to get it right. But they can (and do) investigate if something looks wrong. This is why Chapter 7's record-keeping matters -- if HMRC asks, you need to prove your numbers.

Who needs to file

You must file a Self Assessment return if you:

• Are self-employed and earned more than 1,000 (Trading Allowance)
• Are a partner in a business partnership
• Had untaxed income (rental income, investment income above your allowances, foreign income)
• Earned over 150,000 (even if all through PAYE)
• Need to pay the High Income Child Benefit Charge (income over 60,000 and receiving Child Benefit)
• Are a company director (in some cases)
• Had capital gains above the 3,000 annual exemption

If you're employed with no other income and earn under 150,000, you probably don't need to file. PAYE handles everything.

The dates that matter

Date	What	Penalty if missed
5 October	Register for Self Assessment (first year only)	No direct penalty, but delays filing
31 October	Paper return deadline	100 immediate penalty
31 January	Online return deadline + pay tax owed + first Payment on Account	100 immediate penalty + interest on late payment
28 February	5% surcharge on tax unpaid for 30 days	5% of outstanding tax
31 July	Second Payment on Account	Interest on late payment
1 August	5% surcharge on tax unpaid from January that's still outstanding 6 months later	Additional 5%

The 31 January pile-up: This is the busiest date in the UK tax calendar. Your online return is due, last year's tax must be paid, AND your first Payment on Account for the current year is due -- all on the same day. Plan for it.

Payments on Account

This trips up almost every first-time filer. Payments on Account are advance payments towards next year's tax bill. HMRC assumes you'll earn a similar amount next year and asks you to prepay half upfront.

Here's how it works:

1. You file your 2025/26 return and owe 2,000 in tax
2. On 31 January 2027, you pay: 2,000 (this year's tax) + 1,000 (first Payment on Account for next year) = 3,000 total
3. On 31 July 2027, you pay: 1,000 (second Payment on Account)
4. When you file your 2026/27 return, if your actual tax was 2,400, you've already paid 2,000 in Payments on Account. You just pay the remaining 400.

First year shock: Your first Self Assessment bill is always the biggest because you're paying the current year's tax AND half of next year's in one go. If you owe 2,000, expect to pay 3,000 in January. This is why the "set aside 30%" rule from Chapter 6 is so important.

You can apply to reduce Payments on Account if you expect to earn less next year. But if you reduce them too much and underpay, HMRC charges interest on the shortfall.

Jargon Buster: Payments on Account Advance payments towards your next tax bill, based on the previous year's liability. You pay two instalments: 31 January (50%) and 31 July (50%). They only apply if your previous year's tax bill was over 1,000 and more than 80% of your tax was not collected through PAYE.

The "set aside 30%" rule

If you're self-employed, the simplest way to avoid a January shock is to set aside money as you earn it. The 30% rule is a rough but effective guideline:

• 20% for income tax (basic rate)
• 6% for Class 4 NI
• ~4% buffer for Class 2 NI and rounding

Every time you receive a payment or calculate monthly profit, move 30% into a savings account you don't touch. When January comes, the money is there.

If you earn enough to hit the Higher Rate (40%), increase this to 40-45%.

Filing your return: What you'll need

Before you start, gather:

• Your UTR (10-digit Unique Taxpayer Reference)
• Your Government Gateway login
• Your P60 (if you're also employed)
• Your total self-employed income for the year
• Your total allowable expenses (see Chapter 9)
• Any P11D showing employment benefits
• Bank interest received (your bank can tell you this)
• Student loan plan type
• Any other income (rental, dividends, etc.)

The form itself (SA100 + SA103):

The main Self Assessment form is the SA100. As a self-employed person, you also complete the SA103 (self-employment supplement). If you file online (which you should), the HMRC system guides you through each section:

1. Personal details -- name, UTR, National Insurance number
2. Employment income -- your P60 figures if you're also employed
3. Self-employment (SA103) -- your business income and expenses
4. Other income -- bank interest, dividends, rental income
5. Tax reliefs -- pension contributions, charitable giving
6. Student loan -- plan type
7. Calculation -- the system calculates your tax. Check it.
8. Submit -- file and note the reference number

The whole process takes 30--60 minutes if your records are in order (Chapter 7). It takes 3 days if they're not.

Penalties: The escalation ladder

HMRC's penalty system escalates the longer you leave it:

Delay	Penalty
1 day late	100 (even if you owe no tax)
3 months late	10/day for up to 90 days (max 900)
6 months late	300 or 5% of tax due (whichever is higher)
12 months late	300 or 5% of tax due (whichever is higher), plus potential additional penalties for deliberate non-compliance

Late payment (separate from late filing):

• 30 days late: 5% surcharge on unpaid tax
• 6 months late: additional 5% surcharge
• 12 months late: additional 5% surcharge

The 100 penalty for being one day late applies even if you owe zero tax. It's the most common penalty and the most avoidable. File on time even if you haven't paid yet -- the filing penalty is separate from the payment penalty.

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Real Scenario: Sam's first tax return

Sam is employed at 35,000 and earned 4,800 from Unbought with 2,620 in expenses (stock, fees, shipping, supplies). Profit: 2,180.

Sam's Self Assessment (2025/26 tax year, filed January 2027):

Section	Amount
Employment income (from P60)	35,000
Self-employment income	4,800
Self-employment expenses	-2,620
Self-employment profit	2,180
Total income	37,180

Tax calculation:

Item	Amount
Personal Allowance	-12,570
Taxable income	24,610
Income tax at 20%	4,922.00
Tax already paid through PAYE	-4,486.00
Income tax owed via SA	436.00
Class 4 NI (2,180 x 6%)	130.80
Class 2 NI	179.40
Total owed	746.20

Payments on Account: Because Sam's SA tax bill is under 1,000, no Payments on Account are required. Sam just pays 746.20 by 31 January.

Sam's lesson: The side hustle earned 2,180 profit but only cost 746.20 in extra tax. That's an effective tax rate of 34% on the self-employed income (because it sits on top of the employment income). Still worth it -- 1,433.80 net is money Sam wouldn't have otherwise.

Real Scenario: Steve's bigger bill

Steve went full-time self-employed in October 2025. For the 2025/26 tax year:

• Employment income (April -- September): 14,000
• Self-employment income (October -- March): 18,000
• Self-employment expenses: 4,200
• Self-employment profit: 13,800
• Total income: 27,800

Steve's tax bill:

• Income tax: (27,800 - 12,570) x 20% = 3,046
• Tax paid through PAYE: -1,486
• Income tax via SA: 1,560
• Class 4 NI: (13,800 - portion of 12,570 not used by employment) -- approximately 592.80
• Class 2 NI: 89.70 (half year)
• Total owed: ~2,242.50

Payments on Account kick in: Steve's SA tax is over 1,000, so HMRC requires Payments on Account. On 31 January 2027, Steve pays: 2,242.50 + 1,121.25 (first PoA) = 3,363.75.

Steve set aside 30% of his self-employed profit (4,140) in a savings account. That comfortably covers the January bill. The 31 July PoA of 1,121.25 comes from the remaining savings plus a few months more of setting aside 30%.

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Checklist: Self Assessment filing

• Confirm you're registered for Self Assessment (UTR received)
• Log into HMRC online services with Government Gateway
• Gather your P60 (if employed)
• Calculate total self-employed income (all money received)
• Calculate total allowable expenses (receipts and records from Chapter 7)
• Check for any other income (bank interest, dividends, rental)
• Complete SA100 + SA103 online
• Review the calculation -- does it match your expectations?
• Submit the return (note the confirmation reference)
• Pay any tax owed by 31 January
• Note the Payments on Account amounts for 31 January and 31 July
• Set calendar reminders for all payment dates

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Jargon Buster

Term	Plain English
Self Assessment	The system where you calculate and report your own tax to HMRC
SA100	The main Self Assessment tax return form
SA103	The self-employment supplement -- the part where you report business income and expenses
Payments on Account	Advance payments towards next year's tax, due 31 January and 31 July
Balancing payment	The difference between your actual tax bill and what you already paid through Payments on Account
Tax liability	The total amount of tax you owe for the year
Surcharge	An extra penalty charged on top of unpaid tax