Questions about UK tax returns

The UK tax year runs from 6 April to the following 5 April (i.e. the 2023/24 tax year runs from 6 April 2023 to 5 April 2024). After the end of each tax year you typically have until the following 31 January to file your self-assessment tax return with HMRC.

The most important tax dates to remember are as follows:

Tax return deadlines

• Register with HMRC to complete a tax return: 31 October
• Deadline for submitting your tax return (on paper): 31 October
• Submission deadline for your tax to be coded: 30 December
• Deadline for submitting your tax return (online): 31 January

Payment deadlines

• Balancing payment of tax and first payment on account (if required): 31 January
• Second payment on account (if required): 31 July

In order to prepare your tax return, you will need us to provide us with the relevant tax information. You can do this in two different ways:

• Key-in the information directly into EY TaxChat, or
• Provide the documents in EY TaxChat by taking a photo, or uploading the documents from your mobile phone, tablet or laptop.

If you have submitted a tax return previously this is a good starting point to know which information we require. We have provided a guide below, however rest assured the information we request from you will be tailored depending on your personal situation:

• Employment - P60/P45 and P11D (if applicable). In certain circumstances, we may also ask for payslips
• Self-employment - Details of your self-employment income and expenses. These can be recorded on a spreadsheet and sent to us, or you can forward receipts/invoices
• Property income - Details of your rental income and expenses. These can be recorded on a spreadsheet and sent to us, or you can provide the monthly statements
• Interest - Bank interest certificates (or statements) showing the amount of any interest received
• Dividends - Dividend vouchers detailing the amount of any dividends received. If you hold assets in an investment portfolio, we may require a copy of the annual tax pack
• Capital gains/losses - For any capital gains/losses, we will require details of the purchase and sale of the asset. If you hold assets in an investment portfolio, we may require a copy of the annual tax pack
• Pension contributions - If you are part of a workplace pension, we require details of both employee and employer contributions made during the year (these are usually detailed on your March payslip). In addition, if you contribute to a personal pension scheme, we require details of any contributions made. Your pension provider will be able to provide you with this information
• Charitable donations - If you make Gift Aid donations to a registered charity, we will require details of these to claim tax relief on your tax return
• Tax efficient investments - For any EIS/SEIS investments made during the year we require copies of the EIS/SEIS certificates

Where you keep your own records, we are happy to accept a simple spreadsheet of your income and expenses in most instances.

When you register your requirement to file a tax return, HMRC will issue you with a 10-digit number. This is called a UTR number and you will require this to submit your tax return.

You can apply directly online with HMRC to obtain a UTR number at www.gov.uk/log-in-register-hmrc-online-services/register.

Alternatively, if you sign up for EY TaxChat we can apply for a UTR on your behalf.

At the start of a new tax year, or if you have started a new job, HMRC will issue you with a PAYE Notice of Coding detailing your tax code. Your tax code is used by employers (or pension providers) to deduct tax through the Pay As You Earn (PAYE) system. 

Understanding your tax code is important to ensure that you don't end up paying the wrong amount of tax during the year. You should always check that the tax code stated reflects your present situation.

One of the most common errors to watch out for is if you are on a BR, D0 or D1 code. This means that you are not getting the tax-free personal allowance. If any of these codes apply and you do not have a second job, it could be that the code is incorrect, and you may need to contact HMRC to rectify this.

When you complete your tax return you may have additional tax due. This is known as the balancing payment and is due by 31 January following the end of the relevant tax year (i.e. the deadline for paying any tax due for 2023/24 is 31 January 2025​).

If you are required to make a balancing payment to HMRC (and at least 20% of your earnings are not taxed via PAYE), then you may also need to make two payments on account, in advance, for the following tax year.

The two payments are due in equal instalments on 31 January (at the same time as your balancing payment) and the following 31 July. If your tax liability for the following year is lower than the payments on account made you will receive a refund from HMRC.

HMRC can issue penalties for a number of reasons. Some examples are as follows:

• Failure to notify HMRC where you have a requirement to complete a tax return
• Failure to submit your tax return on time
• Failure to pay your tax to HMRC by the deadline
• Failure to accurately declare your taxable income and gains

The penalties applied by HMRC are progressive and can increase depending on the length of time it takes you to complete the above actions. In addition, HMRC can levy interest where any tax payments are made late.

In exceptional circumstances, you can appeal to HMRC to remove any such penalties, however you would need to provide a suitable explanation.

The ‘personal allowance’ is the tax-free amount you are entitled to earn before paying income tax. The current personal allowance is £12,570.

However, it should be noted that the personal allowance will be reduced by £1 for every £2 of taxable income earned over £100,000. Therefore, if your taxable income exceeds £125,140, you will no longer receive the personal allowance.

In general, it is a scheme administered by your employer in order to issue you with shares in the company you work for; typically used to incentivise staff or as part of a reward package.

There are currently four main types of tax advantaged shares schemes:

1. Share Incentive Plans (SIPs)
2. Save As Your Earn (SAYE)
3. Company Share Option Plan (CSOP)
4. Enterprise Management Incentives (EMI)

For your employer to run these schemes they must meet certain conditions.

Tax advantaged share schemes are generally not chargeable to income tax or national insurance if the shares are held for their specified period (normally 3–5 years). Capital Gains Tax (CGT) may be due on disposal of the shares.

If your employer grants a non-tax advantaged share option, typically you will pay income tax and national insurance on the market value of the shares via payroll. Alternatively, if you have paid a sum of money towards the purchase of the shares you will pay income tax and national insurance on the difference between the market value of the shares and the price you paid for the shares yourself. You will be subject to Capital Gains Tax (CGT) on the eventual sale of the shares.

The rules for each share scheme are complex and differ depending on the particulars of the scheme. The above is a high level indication of the tax treatment only and should not be relied upon. You should seek professional advice to discuss the specific treatment of any share scheme you are a member of.

Relief at source allows you to obtain tax relief for the pension contributions you make into your pension scheme.

This is available to those who pay either personal pension contributions (outside of any employment) or if you pay your pension contributions from your post-tax salary. This will not apply to you if you contribute under a salary sacrifice scheme or net pay arrangement with your employer as you should have already had tax relief on these contributions via payroll.

Your pension provider will automatically claim relief at the basic rate of tax. If you are a higher or additional rate taxpayer, you can claim further relief by recording these contributions on your tax return.

Scheme Pays allows the annual allowance charge to be paid using pension scheme funds rather than being funded directly by you.

Certain conditions need to be met for the annual allowance charge to be paid under Scheme Pays on a mandatory basis. For example, the pension growth must exceed the standard annual allowance of £60,000 in the year (meaning some individuals with a tapered annual allowance will not qualify) and the annual allowance charge must exceed £2,000. You may be able to use Scheme Pays on a voluntary basis if you do not meet the mandatory conditions, depending on your pension scheme’s rules.

EY teams can assist if you are considering using Scheme Pays, by providing indicative calculations highlighting the potential cost of paying the annual allowance tax charge personally or using the Scheme Pays facility which will reduce the future value of your pension.

Generally, when you reach the age of 55 you can start withdrawing money from your pension scheme. Each pension plan will set their own age limit for when you can start taking money, so check with your pension provider if you are unsure.

The first 25% of your pension fund can be taken as a tax-free lump sum. On the remaining 75% you will be required to pay tax at your marginal tax rate.

There are options in terms of taking the money from your pension pot, as follows:

• Withdrawing all or part of your pension in cash
• Purchasing a product which can give a guaranteed income for life (usually referred to as an ‘annuity’)
• Investing your income to provide flexible retirement income (usually referred to as ‘flexi-access drawdown’)

Most pension providers will allow you to adopt various combinations of the above, however it is best to ask your pension provider what they offer in advance as they may not provide all options. 

Principal Private Residence (PPR) relief is a relief that is available when you sell your main or only home. If you have only ever had one home and have occupied it since its purchase, the whole gain would usually be exempt from CGT under the PPR rules and any profit you make would be tax-free.

You can only qualify for one main home under the PPR rules at any one time; this is the same for married couples and civil partners who can only have one main home between them. Therefore, if you have two properties, you may wish to make an election as to which is your main home.

If you have been absent from the property, you may still be able to claim PPR during that time for:

• Any periods of absence (for whatever reason) not exceeding three years in total
• Any period of absence when employed outside the UK
• Any periods not exceeding four years in total due to certain employment requirements

In order to qualify for the above periods, you will usually have had to occupy the property as your main residence both before and after the absence. In addition to the above, your last nine months of ownership of a PPR property is always classed as 'deemed occupation' and will qualify for relief.

EY can support in calculating any PPR relief available should you plan to sell a property.

There is a reporting requirement relating to the disposal of UK residential properties which give rise to a capital gains tax liability. A property that has always been used as your main home will generally be fully exempt from capital gains tax.

Many UK residential property disposals will now need to be reported to HMRC within 60 days of the disposal. Any capital gains tax due will also need to be paid to HMRC within 60 days. The 60-day reporting requirement applies from the date of completion. HMRC may charge penalties and interest for a failure to meet the deadline.

HMRC have launched a new online service to allow reporting; the service also allows EY to make submissions on behalf of our clients.

Non-UK residents - If you are not resident in the UK there is also a regime in place that requires all properties, residential or commercial, to be reported to HMRC within 60 days. Unlike for UK residents, this is regardless of whether any capital gains tax is due.

The cash basis is a simplified way to work out the profit of your business. It means that you only need to report the money that you receive and the expenses you pay out in the relevant period. You do not have to account for monies owed to you or amounts that you owe to suppliers or creditors (known as ‘traditional accounting’).

You can use the cash basis if your business turnover is £150,000 or less a year. You must keep records of all business income and expenses to work out the profit to declare on your tax return. If your business is small, this method may be more suitable than the traditional accounting basis.

The cash basis is not suitable for everyone; for example, if you have losses you want to set off against other general income. You should seek professional advice to discuss whether the cash basis is appropriate for you.

There are several different ‘classes’ of National Insurance (NI):

Class 1 NI contributions are payable if you are employed. Your employer will automatically calculate and deduct Class 1 NI contributions through payroll.

Class 2 NI contributions are due if your self-employment profits are £6,725 or more in a year. Class 2 contributions are based on a set weekly rate (£3.45 per week). If your trading profits are less than this amount, you can voluntarily pay Class 2 NI as these contributions qualify for certain benefits, for example, the state pension.

Class 3 NI contributions are voluntary. You can elect to pay voluntary Class 3 NI if you want to fill any gaps in your NI record.

Class 4 NI contributions are due if your self-employment profits are £12,570 or more in a year. Class 4 NI is payable at a rate of 6% for the 2024/25 tax year (9% for 2023/24)​ on your profits between £12,570 and £50,270 and 2% on profits over £50,270.

If you are self-employed, you potentially pay two kinds of NI, Class 2 and Class 4. Most people pay Class 2 and Class 4 contributions through their tax return.

You stop paying Class 2 NI when you reach State Pension age and stop paying Class 4 NI from 6 April after you reach State Pension age.

If you are both employed and self-employed, there is an interaction between each NI class as there is a maximum amount of NI an individual can pay. These calculations can prove complicated, therefore if you are in this position, you should seek professional advice.  

The Annual Investment Allowance (AIA) is a tax relief known as a ‘capital allowance’ which is deducted from self-employment profits before tax is calculated.

If you buy a piece of plant or machinery that qualifies for the AIA, you can deduct 100% of its cost from your profits. AIA can be claimed on most equipment purchased for your business. You cannot claim AIA on cars, items that you previously owned and assets given to your business. You can, however, claim a writing-down allowance on these assets.

There are limits on the amount of AIA claimed in a particular year, the current limit is £1 million.

The trading allowance is a tax-free amount of up to £1,000 a year if you have self employment or casual income, for example, gardening or babysitting.

If your gross trading income is less than £1,000, you do not need to tell HMRC or report the income on your tax return (although you may want to complete a tax return if you have losses to claim).

If your gross trading income is more than £1,000, you can use the allowance by deducting the amount from the trading income on your tax return (instead of deducting actual expenses). The trading allowance cannot be used to generate a loss and you cannot deduct any other business expenses if you claim the trading allowance.

Business asset disposal relief (previously known as entrepreneurs’ relief) allows you to get a reduced rate of 10% capital gains tax (CGT) if you dispose of ‘qualifying assets’, such as:

• All or part of your business
• Assets used in your business
• Shares of securities in a company you work for

To qualify for the relief you must meet all the ‘qualifying conditions’ throughout the ‘qualifying period’ of 2 years up to the date of the disposal. You can claim a total of £1 million in business asset disposal relief over your lifetime.

The rules concerning business asset disposal Relief are complex and you should seek professional advice if you think you are impacted. EY can support you in making a claim for business asset disposal relief on your tax return.

If you are considered non-UK domiciled you can choose between submitting your tax return on the ‘arising’ or ‘remittance’ basis of taxation.

Under the arising basis, you must pay UK tax on your worldwide income and capital gains, for the period you are considered resident in the UK.

Under the remittance basis, you must pay UK tax on UK sourced income and capital gains in full, but are only liable to UK tax on foreign income and capital gains to the extent that the foreign income or gains are brought into or ‘remitted’ to the UK (see ‘What is a remittance?’ section).

If you claim the remittance basis and your unremitted foreign income is more than £2,000, you will lose your entitlement to the UK personal allowance and the CGT annual exemption.

Other charges may also apply for using the remittance basis, as follows:

• If you have been resident in the UK for at least seven of the previous nine tax years, a remittance basis charge of £30,000 applies
• If you have been resident in the UK for at least twelve of the previous fourteen tax years, the remittance basis charge is increased to £60,000

EY teams can support you in deciding whether the remittance basis is suitable for you.

Income or gains are remitted to the UK if brought into or ‘enjoyed’ in the UK in any way, either by the individual who earned them or someone connected to them. For example:

• If money is paid into or transferred into a UK bank account
• If cash is withdrawn in the UK from an offshore account
• If an item in the UK is paid for with a non-UK credit card and the credit card bill is settled with non-UK funds

The rules concerning remittances to the UK are complicated and you should seek professional advice if you are unsure whether they apply to you. 

A double taxation agreement (DTA), also known as a tax treaty, is an agreement between two countries aimed at eliminating any double taxation, so you do not pay tax on the same income twice.

The UK has a DTA agreement with most (but not all) countries. A full list can be found at www.gov.uk/government/collections/tax-treaties.

You may still have a requirement to file a tax return in both countries and potentially report the same income, however, one country can usually give you a foreign tax credit (FTC) for the tax suffered in the other country (see ‘What is an foreign tax credit? Section).

If you are paying tax in both the UK and another country on the same income and there is a double taxation agreement (DTA) in place between those countries, one country can usually give you a foreign tax credit (FTC) for the tax suffered in the other country.

You can make a claim for an FTC on your tax return if you are resident in the UK and have suffered foreign tax on your income in another country. The FTC you can claim will depend on the terms of the DTA, however the maximum amount you can claim will be the tax you have paid on that income in the overseas country, or the UK tax suffered on that income if lower.

EY teams can support you in claiming any FTC available to you when you are paying tax in more than one country.