Do you have to file a Self Assessment tax return?

Self Assessment is a process for reporting income that HMRC might not already know about. Some individuals must file a Self Assessment tax return by 31st January each year as a legal requirement, while others may choose to do so voluntarily. Unsure whether you need to submit a tax return to HMRC this year? Here's some information that should help.

Many individuals are legally required to submit a Self Assessment tax return to HMRC each year.

Self-employed sole traders 

HMRC expects you to file a Self Assessment tax return if you’re self-employed and trading, and you earned more than £1,000 (before deducting any costs that qualify for tax relief) during the tax year in question.

HMRC’s definition of ‘self-employed and trading’

If you sell goods or services, it’s important to bear in mind that you may be classed as self-employed and trading regardless of whether you’ve set up as a sole trader with HMRC. To help determine this, HMRC uses a framework called badges of trade. The 'badges' are:

  • whether you’re looking to make a profit by selling goods or services
  • the number of transactions you make
  • the nature of what you sell
  • the existence of similar trading transactions or interests
  • whether you make any changes to items before you sell them
  • the way that sales are carried out and whether this is typical of a trade
  • the origin of the money you use to buy items that you sell
  • how you acquire items that you sell
  • how much time you leave between buying or acquiring items and then selling them

Limited company directors

If you’re the director of a limited company, you may well be asked to file a Self Assessment tax return every year, especially if you're taking pay and/or dividends from the company. If the company is a non-profit organisation and/or you didn’t receive any pay or benefits (like travel expenses or a company car) during the tax year, HMRC may not require you to file a tax return. 

In addition, all companies - including non-profit organisations - are required to submit an annual company tax return to HMRC. 

Partners in a business partnership

If you’re a partner in a business partnership, HMRC expects you and your business partner(s) to file a Self Assessment tax return every year. The partnership itself is also required to submit an annual partnership tax return to HMRC. 

Filing a tax return voluntarily 

There are certain circumstances in which some individuals might choose to file a Self Assessment tax return voluntarily. These reasons are outlined on HMRC’s website, where you can also check if you need to send a Self Assessment tax return.

The simple way to take the stress out of Self Assessment 

If you’re a sole trader or limited company director, FreeAgent’s award-winning accounting software uses the data you enter throughout the tax year to populate parts of your tax return for you. 

It also calculates how much Income Tax you owe and, if you’re a sole trader, how much you owe in Class 2 and Class 4 National Insurance

When you’re ready to file, you can use FreeAgent to submit your tax return directly to HMRC. 

Find out more about FreeAgent’s Self Assessment functionality to see just how easy filing your tax return can be. To learn more about the Self Assessment process and your responsibilities to HMRC, take a look at the resources in our dedicated Self Assessment content hub.

Disclaimer:The content included in this guide is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this guide. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.