Receiving a text, email, or that distinct brown envelope from HMRC can instantly spike your heart rate. The rules on who needs to file a Self Assessment tax return are constantly shifting. For the 2024/25 tax year, there are some significant changes you need to know about.
Many people assume Self Assessment is only for the self-employed. That is a common and often expensive misconception.
Even if you are fully employed and pay tax through PAYE, you might legally need to file a return to declare additional income. On the other hand, you might need to file one to claim back significant tax relief you are owed.
Below, we break down the 10 most common reasons you need to file, cutting through the jargon with professional clarity.
1. Self-Employment (Sole Traders)
If you work for yourself, this is the most obvious trigger. You must file a return if your gross trading income (turnover before expenses) was more than £1,000 in the tax year. This is known as the 'trading allowance'.
- Note: If your income is below £1,000, you may not need to file. However, you might choose to do so voluntarily to pay Class 2 National Insurance towards your State Pension.
2. Business Partnerships
If you are a partner in a business partnership, you effectively have no choice. You must submit a personal Self Assessment tax return regardless of your income level. The partnership itself will also need to file its own separate return.
3. Property Income
This is where many people get caught out. You generally need to file a return if you receive income from renting out a property (UK or overseas) or from Furnished Holiday Lettings (FHLs).
The Rules:
- Income between £1,000 and £2,500: You must contact HMRC. They may collect the tax through your tax code rather than a full return.
- Net income (profit) over £2,500: You typically need to register for Self Assessment.
- Gross income (turnover) over £10,000: You must file a Self Assessment tax return, even if your profit is low after expenses.
4. Significant Untaxed Income
HMRC wants to know about money you have earned that has not touched the PAYE system. You will likely need to file if you have:
- Untaxed income over £2,500: This could be from tips, commission, or casual freelance work.
- Savings or Investment Income over £10,000: If you earn more than £10,000 in interest or dividends, this exceeds what can usually be collected via your tax code.
5. The High Income Child Benefit Charge (HICBC)
This is a strict liability. If you or your partner claim Child Benefit and one of you has an 'adjusted net income' of over £60,000 (for the 2024/25 tax year), you may need to file a return to pay back some or all of the benefit.
- Advisor’s Note: The threshold was previously £50,000. From April 2024, it rose to £60,000. Remember that the obligation to check your income remains yours and not HMRC's.
6. Capital Gains Tax
Did you sell a second home, shares, or crypto assets? If you sold an asset for a profit and need to pay Capital Gains Tax (CGT), a Self Assessment return is the standard way to report it. This applies if your total gains are above the annual exempt amount.
7. Foreign Income
If you are a UK resident, you are generally taxed on your worldwide income. If you receive income from overseas, whether it is pension, wages, or rental income, you almost always need to file a tax return to report it. This applies even if you have already paid tax on it in another country.
8. The "£150,000 Income" Rule (Important Update)
Historically, anyone earning over £100,000 (and later £150,000) had to file a return automatically.
However, the rules have changed. For the 2024/25 tax year onwards, HMRC has removed the requirement to file a return purely because your income is over £150,000. This applies provided all that income is taxed via PAYE and you have no other reason to file.
- Warning: Do not assume you are exempt. If you earn this much, you often have complex affairs such as pension tapering or investment income that will require a return anyway.
9. Claiming Employment Expenses
If you are an employee and have spent your own money on work-related expenses like professional subscriptions, business mileage, or tools, you may be due tax relief. If the total claim is more than £2,500, you must file a Self Assessment return to claim it. Claims under £2,500 can usually be done via a P87 form.
10. Claiming Specialist Tax Reliefs
Often, you need to file a return not because you owe tax, but because the government owes you. You must file a return to claim sophisticated tax reliefs, specifically if the tax relief claimed is substantial (often over £10,000) or complex:
- Pension Contributions: Essential for higher or additional rate taxpayers to claim back the extra 20% or 25% tax relief on their contributions.
- Venture Capital Trusts (VCTs): To claim 30% income tax relief.
- Enterprise Investment Scheme (EIS): To claim 30% income tax relief.
- Community Investment Tax Relief (CITR): To claim relief for investing in disadvantaged communities.
Official Guidance & References
If you are still unsure, it is always safer to check directly with official sources. Failing to notify HMRC can lead to penalties.
- Check your status instantly: Check if you need to send a Self Assessment tax return (GOV.UK)
- HMRC Internal Manuals (Technical Criteria): SAM100060 - Criteria for an SA record
- Tax on Foreign Income: Tax on foreign income: The rules
- High Income Child Benefit Charge: Understand the High Income Child Benefit Charge
