UK Taxes - Preparing self-assessment tax returns that are due to be submitted in January 2023.
Rupeshkumar Bomali
MAAT (UK) | AATQB (UK) | MSc Investment and Finance (Distinction) | Bloomberg Certified | ACCA Finalist | Ex-Pocket Aces, TikTok (Bytedance), KNAV, J P Morgan, TCS
The article on Self Assessment cover all aspects of the Self Assessment tax forms which need to be completed by the individuals.
There are a number of chapter in this series to assist you in the completion of different areas of the tax forms.
1 - Introduction to Self Assessment
2 - Income from employment, pensions and state benefits
3 - Income from self-employment and partnerships
4 - Property and investment income
5 - Other income
6 - Tax relief and allowances
7 - Capital gains
8 - Calculating the tax liability
Chapter 1 - Introduction to Self Assessment
Notice to complete a tax return
The tax year 2021/22 starts on 6 April 2021 and ends on 5 April 2022. Individuals are notified by HMRC after the end of the tax year if they need to complete a tax return, by receiving a 'notice to complete tax return.'
The return must be completed and returned to HMRC by the due date, otherwise the individual will incur penalties.?
A taxpayer who is not registered for Self Assessment has a duty to notify HMRC if they have a new source of income or gains that makes them chargeable to income tax or capital gains tax.
The taxpayer must notify HMRC by 5 October following the end of the tax year in which the taxable income arose (i.e. within six months of the end of the relevant tax year).
Taxpayers do not usually need to register for Self Assessment if they earn less than ￡1,000 (turnover) from a self-employment or their sole sources of income are taxed under PAYE, e.g. salary or pension. It may be beneficial to register voluntarily if the tax payer wants to claim some tax reliefs. There have also been cases previously where HMRC believed tax returns were due (e.g. for a Director) where this is not required by statute. HMRC have since changed their guidance on this point.
Compliance
Self Assessment tax returns must usually be submitted to HMRC by:
The exception to this rule is if HMRC issue a notice to file a return within three months of the deadline dates above. In this case, the due date will then be three months from the date of notice.
Starting the tax return
Starting the tax return might be daunting, so make sure you read and complete each section of the return carefully.
Tax returns may be completed on paper or online; the end result will be exactly the same.
If filing on paper the main form is the SA100, and this is always completed. It's normally accompanied by one or more supplementary forms depending on the individual's circumstances. A series of questions must be answered to determine which supplementary forms to complete.
If filing online a number of questions must be answered, which will then determine the areas of the tax return requiring completion.?
The online return will automatically calculate the tax liability.?
To calculate the tax liability for a paper return, the form SA110 (Tax calculation) must be completed.?
We'll now start to look at the basic details required in all tax returns.?
Personal details
If individuals are filing their own tax returns online, they must set up a government gateway account (https://www.gov.uk/log-in-file-self-assessment-tax-return) with HMRC to receive a unique user ID and password. Once the user is logged on, the return can be reviewed online.?
Agents filing returns on behalf of their clients will usually use commercially available software. References to online returns below refer to submission via HMRC's portal. Commercial software will differ as to where the basic information is kept, though this will usually be considered when setting up a client on the software for the first time.
HMRC will need authorisation to liaise with the agent regarding the client's affairs, however this is not a necessity for simply filing the return through commercial software.
This is useful to know if a client?needs immediate assistance filing a return (i.e. the accountant is instructed in January) and agent authorisation can be provided to HMRC at a later date.?
A paper based return is issued by HMRC or downloaded from their website.?
There are details that must be checked on returns to ensure they're correct, and questions that must be answered:?
a. Basic details
If any of the information is missing or incorrect it must be corrected or changed
b. Other details
You may choose whether or not to enter the following:
And the following box on the online return is compulsory:
Taxpayer residency status:??
Note: HMRC determines the residency status based on where an individual lived for the majority of the tax year.?The amount of tax depends on the residency status.
c. Blind person's allowance and student loan and post graduate loan repayments
Blind person's allowance applies if you or your spouse or civil partner is registered blind on a local authority or other register. See Chapter 6 for further details.?
If you received notification from the Student Loan Company that repayment of an Income Contingent Student Loan began before 6 April 2022 this section is applicable. See Chapter 8 for further details.
In the paper based form, these questions are located in the sections called Blind Person's Allowance and Student Loan and Postgraduate Loan repayments??
Tailoring the return
With the paper based form, supplementary forms may need to be completed depending on the individual types of income. This section of the form is called 'What makes up your tax return'.?
If completing the form online, you will be asked to complete a number of Yes/No questions in the 'Tailor your return' section. Select yes if you have any of types of taxable income or gains shown below. The tax return will be automatically generated depending on the answers to the questions. If you received notification from the Student Loan Company that repayment of an Income Contingent Student Loan began before 6 April 2021 this section is applicable.
The details contained within each section are covered in later modules. Both versions of the forms use the same questions; they're just worded slightly differently. We'll consider each of the sections in turn.
a. Employment
This applies if the individual was an employee, director, office holder or agency worker during the tax year.
If the individual had more than one employment, a page must be completed for each employment.
The paper based form which should be completed is called SA102.
See Chapter 2 for further details.
b. Self-employment
This section must be completed if the individual was self-employed during the tax year.
If the individual had more than one self-employment, a page must be completed for each self-employment.
If the individual has self-employed income of ￡1,000 or less, this section may not need to be completed.
SA103S is for self-employment where the turnover was less than ￡85,000 in the year (pro-rata for the period of trading).
SA103F is for self-employment where the turnover exceeds ￡85,000 for the year (again pro rata for period of trading).
See Chapter 3 for more details.
c. Partnership
If the individual was in a partnership during the tax year complete this section.
If the individual had more than one partnership, a page must be completed for each partnership.
The paper based form which should be completed is called SA104.
See Chapter 3 for further details.
d. UK property
This section must be completed if the individual received any income from renting out UK property during the tax year.
If the individual has property income of ￡1,000 or less, this section may not need to be completed.
You should also consider whether the taxpayer is eligible for rent-a-room relief. If they are and they earn up to ￡7,500, they may not need to complete a tax return as the exemption is automatic.
This section can include foreign property income (up to a maximum of ￡1,000, but excluding furnished holiday lettings), rather than completing the foreign income section.
The paper based form which should be completed is called SA105.
See Chapter 4 for further details.?
e. Foreign Income
This applies if the individual received any foreign income during the tax year.
This section must be completed if any income from foreign property reported in the Foreign section exceeds ￡1,000.
If the total untaxed foreign interest received is ￡2,000 or less, the amount can be included in the interest and dividends section of the tax return instead. If the total foreign dividends received is ￡2,000 or less, the amount can be included in the interest and dividends section of the tax return instead.
The paper based form which should be completed is called SA106.
See Chapter 5 for further details.
f. Capital Gains
Complete this section if the individual disposed of any assets chargeable to Capital Gains Tax during the year. For example, shares, property, a business.
The paper based form which should be completed is called SA108.
See Chapter 7 for further details.
On the online form you'll be asked another series of Yes or No questions. These sections are included in the main paper based form (SA100) or for the less common kinds of income and tax reliefs in the Additional Information form (SA101).?
We'll consider each of these sections in turn:
a. Interest
This applies if the individual received any taxable interest from UK banks, building societies or unit trusts during the tax year. You must include details of interest which has already been taxed.
Interest received from Individual Savings Accounts (ISA's) and national savings certificates is exempt and therefore not taxable.
This section can include foreign untaxed interest (up to a maximum ￡2,000), rather than completing the foreign income section.
The paper based form selection which should be completed is called 'interest and dividends from UK banks and building societies' in form SA100.?
See Chapter 4 for further details.?
b. Dividends
Complete this section if the individual received any dividends from UK companies, open-ended investment companies or authorised unit trusts during the tax year.?
This section can include foreign dividends (up to a maximum of ￡2,000), rather than completing the foreign income section.
The paper based form selection which should be completed is called 'interest and dividends from UK banks and building societies' in form SA100.?
See Chapter 4 for further details.?
c. UK pensions
If the individual received any UK pensions, annuities or state pensions during the tax year, complete this section.
The paper based form selection which should be completed is called 'UK pensions, annuities or other state benefits received' in form SA100.?
See Chapter 2 for further details.?
d. High-income child benefit charge
This section must be completed if you or your partner were entitled to receive child benefit in the 2021/22 tax year and either you or your partner's adjusted net income exceeded ￡50,000.
The paper based form selection which should be completed is called 'High Income Child Benefit Charge' in form SA100.?
See Chapter 8 for further details.?
e. Incorrectly claimed coronavirus support scheme payments
This section must be completed if too much has been claimed incorrectly or in error from HMRC coronavirus support schemes, including the Coronavirus Job Retention Scheme (CJRS), Self-Employment Income Support Scheme (SEISS) and Eat Out to Help Out Scheme.?
The paper based form selection which should be completed is called "Incorrectly claimed coronavirus support scheme payments" in form SA100.?
See Chapter 5 for further details.
f. Other UK income
Complete this section if the individual received any other income during the tax year, which includes:
All of the above are included in the paper based form?SA101, for any other income not listed complete 'Other UK income not included on supplementary pages' in form SA100. Examples include casual earnings and commission.?
g. Income tax losses
If the individual made any income tax losses on other taxable income (for example, casual earnings and commission) complete this section.
Note: this does not relate to income tax losses included in the supplementary pages, for example self-employment losses.?
The paper based form selection which should be completed is called 'Other information' in form SA101.?
See Chapter 6 for further details.?
h. Pension savings tax charges
This section must be completed if the individual is liable to pension savings tax charges in the tax year.
There is a lifetime allowance and an annual allowance on the amount of pension savings that are eligible for tax relief. Therefore, an additional tax charge may be due if these allowances have been exceeded.
Details should be provided by the pension scheme administrator if this section is to be completed.
The paper based form selection which should be completed is called 'Other information' in form SA101.?
See Chapter 2 for further details.
On the online form you'll be asked a series of Yes or No questions. These questions relate to payments, allowances and other information. These sections are included in the main paper based form (SA100). Again, we'll consider each of the questions in turn:?
a. Personal pension contributions
If the individual made contributions to a personal pension or retirement annuity during the tax year, complete this section.
This does not include payments made to an employer's pension, which have been deducted from gross pay before tax (via salary sacrifice).
The paper based form which should be completed is called 'Tax reliefs' in form SA100.
See Chapter 6 for further details.?
b. Charitable giving
Complete this section if the individual made Gift Aid payments or other gifts to charities during the tax year.
The paper based form which should be completed is called 'Tax reliefs' in form SA100.
See Chapter 6 for further details.?
c. Married couples allowance and marriage allowance
The?Marriage allowance?applies if in 2021/22 your income was less than ￡12,570 (excluding up to ￡6,000 in savings income), and you are married or in a civil partnership. Up to 10% of your personal allowance can be transferred to your spouse or partner.?
The paper based form which should be completed is called "Marriage Allowance" in form SA100.
The?married couple's allowance?may be claimed if either parties to a marriage or civil partnership were born before 6 April 1935.
The paper based form which should be completed is called 'Married Couple's Allowance' in form SA101.
See Chapter 6 for further details.?
d. Other tax reliefs
If the individual wishes to claim other tax reliefs (which won't be applicable to most people), complete this section.
The paper based form which should be completed is called 'Other tax reliefs' in form SA101.
See Chapter 6 for further details.?
e. Income tax refunded
This applies if an individual has any 2021/22 income tax refunded or set-off by HMRC or jobcentre plus.
The paper based form which should be completed is called 'Tax refunded or set off' in form SA100.
f. Tax advisor
Complete this section if the individual has an agent acting on their behalf.
The paper based form which should be completed is called 'Your tax advisor' in form SA100.
g. Tax avoidance
If you have entered into a tax avoidance scheme enter here the scheme reference number, SRN, provided by the scheme promoter on form AAG8.?
If a scheme has been used to obtain an actual or expected tax advantage then HMRC must be informed (note: HMRC never approves tax avoidance schemes). On the paper based form this is included in form SA101.
The date may be 2021/22 or any date in the future. It may be earlier if it has been reported previously.?
h. Acting on behalf of someone else
If the form is being completed on someone else's behalf, for example, by an executor or power of attorney, complete this section.
These will be exceptional circumstances. The law allows an executor to sign a return for the period from 6 April up to the date of deceased's death.
The other circumstance when this box is used is when someone is not mentally capable of understanding the form. Someone may have invoked a power of attorney or been appointed by a court act on their behalf.?
The boxes in the paper based SA100 which must be completed are as follows:
?
Joint income
When completing a tax return there may be some income which is owned by more than one individual - owned jointly - such as rental income, bank interest and dividends.?
Each individual owner must complete a separate tax return, so a division of income must be made. Each individual should enter their share of the income on each tax return.
For married couples and civil partners the income from investments held in joint names is usually treated as belonging in equal shares, and each will be taxed on half the income.
Where investments are held in unequal shares an election can be made, but all joint bank and building society accounts are equal, as 'joint beneficial owners'.?
Submission
A paper based tax return requires the signature of the individual before it can be accepted by HMRC.
For online returns, the individual or agent must use the unique user ID and password to submit the return.
Agents should receive approval from the individual before the return is submitted; this will usually be in the form of a signature or approval by email.
Chapter 2 - Income from employment, pensions and state benefits
In this chapter we'll look at income from employment, pensions and state benefits. This will include:
A separate page will need to be completed for each employment held during the tax year.
We'll now start to look at the return in detail.
Employment details
The details from each employment held during the tax year can be found on the P45 or P60.?
Any furlough payments received from employers will be included in the figures on the P45 or P60.
When completing a tax?return, a separate page will need to be completed for each employment held during the tax year.
P45 - A P45 is issued by an employer to an employee who has left the employment during the tax year.
Click?here?for the Government page on draft P45 forms.
Only certain details from the P45 are needed to complete the tax return. You can find the details of this on the below P45, or its alternative.
Box 1 - The PAYE reference number is unique to each employer and it helps HMRC to identify them. It must be entered in the return.
Box 8 - The total pay in this employment and the total tax in this employment need to be entered in the return.
Box 13 - The name of employer must be entered into the tax return.
P60 - A P60 is issued by an employer to an employee who remains in employment on 5 April.
Click?here?for the Government page on draft P60 forms.
If a P60 has been issued then certain information shown on this form will need to be entered into the tax return. You can find the details of this on the below P60, or its alternative.
Pay and income details box - Pay and income tax details in this employment. Do not include the total for the year, as this will be pay and tax from all employer in the tax year.
Employer's name and address box - Employer's name and address and PAYE reference.
Employment details on the tax return
Whether you're completing the tax return online or on paper, the questions are the same. However, they are sometimes worded differently or in a different order.?
We'll start to look at the employment pages of the tax return now, using the paper version – form SA102.?
Let's start by looking at each of the boxes 1–8.
Box 1 - When you complete the form, enter the total pay from the P45 or P60 from this employment. Round down to the nearest whole figure.
Include in this box any disguised remuneration loans received from this employment in the tax year and any tax on the amount paid under PAYE by the employer in box 2.
Disguised remuneration loans are usually a loan or other payment from a third party which are unlikely ever to be repaid.
Box 2 - Enter paid tax. But if your tax shows a R (refund) put a minus in the box. Round up to the nearest whole figure.
Box 3 - In this box include all the tips and gratuities which have been received and may not been include in box 1. They may have been received from a third party.
Box 4 - PAYE tax reference of employer (on the P45/P60). You can't submit online without this.
Box 5 - Employer's name
Box 6 and 6.1 - This box should be selected if the individual is a director of the company. If the individuals ceased being a director before 6 April 2022 enter the date in box 6.1.
Box 7 - This box should be selected if the company is a close company, which means an owner-managed business with five or fewer participators or shareholders.
Box 8 - This box is selected if an individual provided services through a limited company or another type of intermediary such as a partnership, and income tax and national insurance was deducted and paid to HMRC by the client.
Employment benefits in kind
Employees may receive expense payments and benefits (non-cash items) which have to be treated as taxable pay.
If your employer has 'payrolled' your benefits and expenses (this means the tax was deducted from your pay and included in your P60) there is no need to include them here. If not, your employer must give you details of your benefits and expenses on a form P11D, 'Expenses and benefits' and this section must be completed.
The details from the P11D must be transferred to the tax return (shown below).
Click?here?to see a blank P11D form.
Box 9 - From sections F and G of the P11D enter the figure(s) for the total cash equivalent of all cars and vans into box 9.
Box 10 - From sections F and G of the P11D enter the figure (s) for the total cash equivalent of all fuel for all cars and vans into box 10.
Box 11 - From section I of the P11D enter the figure for private medical treatment or insurance in box 11.
Box 12 - From sections C and E of the P11D enter the figure for vouchers, credit cards and excess mileage allowance in box 12.
Box 13 - From section A and L of the P11D enter the figure for goods and other assets in box 13.
Box 14 - From section D of the P11D enter the figure for living accommodation in box 14.
Box 15 - From sections B, H, J, K and M of the P11D enter the figures for other benefits and loans into box 15.
Box 16 - From section N of the P11D enter the figures for expense payments into box 16.
Employment expenses
Most business expenses incurred at work as an employee are paid for by the employer. An employer may reimburse the employee for business expenses that the employee has paid for personally, such as travel and accommodation.?
HMRC must be satisfied that the expense is allowable for tax purposes, otherwise it will be treated as additional income. Where the employer is satisfied that the payment made satisfies the general exemption for business expenses it will be tax exempt in the hands of the employee. The employer is not required to report the payment made and the employee is consequently not required to report it on their personal tax return.?
The employee may have paid business related expenses personally and not been reimbursed by their employer in which case they can claim them on the tax return.
These types of expenses will be considered as followed.
Allowable employment expenses
Where the employee has not been reimbursed for business expenses paid personally they can claim tax relief in the employment expenses section.
Box 17 - This box includes non-reimbursed business travel and mileages claim allowances and where the employer has paid less than approved mileage rate per mile. You can only claim tax relief on the costs you had to pay out in doing your jobs if not reimbursed by your employer.
Travel from home to a permanent work place is not an allowable expenses for tax purposes. By contrast, travel from home to a temporary workplace is an allowable expense. Travelling costs that are necessarily incurred in order to do a job, such as travel from an office or depot to see a customer, are allowable.
Travel from home to customers, suppliers or clients may be allowable, provided it is further than the distance to the office. Food and hotel costs can be included with the travel costs where it is necessary to stay away from home.
Box 18 - Fixed deductions are amounts of flat rate expenses HMRC agree with the trade union, or other bodies, to cover the costs of maintaining or replacing tools or special working clothes.
Box 19 - These are fees which must be paid in order to carry out a profession, and annual subscriptions to HMRC approved professional bodies. See HMRC List 3 for the approved bodies (on the HMRC website).
Box 20 - These are necessary expenses to carry out your jobs, and capital allowances on the cost of equipment used to carry out your jobs.
Share schemes, lump sums and compensation
Income from share schemes, lump sums or compensation is classed as other income and the boxes to be completed are included with the paper based form SA101 - Additional information. The relevant boxes to complete are boxes 1–9 in the Share schemes section.?
Box 1 - Work out the taxable amount on the exercise of share options, on the date of exercise of share options, on the exercise, or on shares you get free or cheaply, or from employment-related securities from your employer. These include:
Only fill in the box 1 if your employer:
For further details refer to Helpsheet 305.
Box 3 - payments are treated as exempt from tax:
Certain compensation payments are taxable (including compensation for change in employment terms) but others are not.
If your clients receives compensation, ensure it is included here only if it is taxable.
Box 4 - An Employer Financed Retirement Benefits Scheme (EFRBS) is an unapproved pension scheme.
Box 5 - If the lump sum payment is more than the ￡30,000 exemption limit, enter the amount over the limit in this box.
Box 6 - This is the tax deducted from the payments above. Sometimes this is calculated via the payroll under PAYE and not shown separately in which case it will declared on the employment pages. If this is the case, leave this blank and put an X in box 7.
Box 8 - This will rarely be used, and you'll have paperwork from the employer to enter in this box.
Exemptions include payments for ill-health, disability during service, death by accident during services and benefits under relevant life insurance policy.
Box 9 - If you have a redundancy payment that is less than ￡30,000 which is covered by the full sum received in box 9. Where the redundancy is more than the exempt figure of ￡30,000, enter the amount over ￡30,000 in box 5, the tax deducted in box 6 and the ￡30,000 limit in box 9.
Box 10 - This is an allowable deduction.
If your employment terms changed or employment ended, you can claim an exemption for specific payments you received for physical or mental impairments.
Foreign service relief was generally removed from 6 April 2018, with exception of seafarers.
Box 11 - This is an allowable deduction.
The deduction is available if you perform all (or the majority) of your duties on a ship.
Offshore installations, used in the oil and gas industry, are not ships and workers on mobile offshore drilling units, semi - submersibles and jack-ups rigs are not seafarers and are not entitled to the deduction.
Box 12 - Refer to Helpsheet 211 (employment - residence and domicile issues) to determine the amount to put into this box.
It is only applicable if you:
You may also need to fill in the "Residence, remittance basis, etc.," pages.
Box 13 - Enter here the sterling equivalent of any foreign tax paid on employment income for which tax credit relief is not being claimed.
Box 14 - This box should be completed if your employer contributes to your overseas pension scheme and you do not pay tax on these contributions.
A statement should be available from your pension provider showing the information required.
UK pensions, annuities and other state benefits received
The sections to complete within the paper return are included in the main tax return (SA100 TR3).
If the online return is being completed, the sections will automatically be generated if 'yes' was selected for the question: 'Did you receive any UK pensions, annuities or state benefits, for example state pension, occupational pension, retirement annuity, incapacity benefit?'.
Let’s now start to look at the sections on UK pensions.
UK pensions
If an individual has received a UK pension or annuity, the sections of the tax return shown below must be completed. The sections shown have been extracted from the paper based tax return.
Box 8 - Enter the "full amount" of state Pension to which the individual is entitled to for the year to 5 April 2022. A letter will have been sent from the Pension Service which will state this entitlement.
If the pension is paid weekly multiply the weekly sum by 52 or 53 if there are 53 Mondays in the tax year. If paid 4 weekly multiply by 13 and if paid quarterly multiply by 4.
The figure should not include the followings, as they are not taxable:
Box 9 - This box should be completed if the individual delayed claiming their state pension for at least 12 months and chose to receive, during 2021/22, a one-off lump sum payment from the Department for Work and Pensions. Enter the payment before before it was taxed (the gross amount).
Box 10 - This is the amount of tax which has been deducted from the lump sum above.
Box 11 - Add together all UK retirement annuities and pensions (other than the State Pension), and enter the gross figures here. Details can be found on the P60 issued by each pension provider.
The details of each pension should be entered into the "Any other information" section.
Box 12 - Enter here the total tax that has been deducted from the pensions shown in box 11. If the P60 shows that tax was refunded, put a minus sign in the box.
State benefits received
The details of the sections on benefits received are shown below. The sections shown have been extracted from the paper based tax return.
Box 13 - Some Incapacity Benefit is taxable. It is not taxable in the first 28 weeks of incapacity and you have been getting it for the same illness since.
It is also not taxable if the incapacity before 13 April 1995. All contribution-based Employment and Support Allowance is taxable.
The P60 provided by the Department for Work and Pensions tells you the taxable amount in both cases.
Box 14 - Any tax taken off Incapacity Benefit. The P60 will give you this figure.
Box 15 - The P60 or P45 provided by the Department for Works and Pensions tells you the taxable amount.
Box 16 - The amounts to be included here are:
Do not include
Chapter 3 - Income from self-employment and partnerships
In this chapter we'll look at how to complete the sections of the tax return on self–employment and partnerships.
This will include:
We'll start by looking at self–employment, which applies when an individual runs a business for themselves (unless they have incorporated a limited company) providing goods or services, and takes responsibility for its success or failure.
Self-employment
Income from self-employment which is less than ￡1,000 is exempt and doesn't need to be declared on the tax return. However, there may be circumstances where an individual wishes to declare the income, for example to ensure future benefit entitlements are protected or to report a trading loss.?
The sections to complete within the paper return are SA103S (short) or SA103F (full). If the online return is being completed, the sections will automatically be generated if 'yes' is selected for the question 'Were you self-employed?'. A separate page will need to be completed for each self-employment business that the individual has in the tax year.
The paper based full form must be completed and further details required on the online form if any of the following apply:
We will look to start with the self-employment pages of the short form (SA103s).
Business details and income
The details below have been extracted from the paper based tax return.?
Box 1 to 3 - Boxes 1 - 3 are self explanatory; for example of a description of business could be "Plumbing"
Some types of property income should be declared here. See Chapter 4, introduction for more details.
Box 4 - This is a tax concession available to people who earn an income as a foster carer or shared lives carer. If you tick this box, also put "Qualifying carer" in box 1.
See Helpsheet 236 for further details.
Boxes 5 and 6 - Boxes 5 and 6 only needs to be completed if the self-employment started or finished in the tax year.
Box 7 - The year end date, for example 31 March 202X.
Box 8 - If the business income less than ￡150,000 (￡300,000 if Universal Credit is claimed) you may use the cash basis. Income is recorded when it is received and expenses are recoded when they are paid. This box must be selected if you chose to use the tax cash basis.
Certain restrictions will apply - a maximum of ￡500 is allowed for interest on borrowings, losses cannot be offset against other income, capital allowances are only available for cars (equipment and vans are included in allowable expenses).
Business income
Below is the business income section of the tax return. The details below have been extracted from the paper based return.
Box 9 - Include all turnover, fees, tips and any commissions before tax withheld at source (e.g. CIS) or other allowances. It must included the value of any payments "in kind" for work.
Do not include coronavirus support payments or SEISS in this box.
Box 10 - Do not include SEISS in this box. Include business income that does not form part of the normal business turnover, such as:
Do not include income in box 10 if you are planning to include it elsewhere in the tax return. For example, business bank interest received which will be included in the main pages of the tax return.
If the taxpayers is subject to an assessment in respect of a coronavirus support scheme payment, only include the amount retained and not (due to be) paid back to HMRC.
Box 10.1 - This allowance cane be claimed instead of expenditure, it may be beneficial to a small trader where expenses and capital allowances are less than ￡1,000. The trading income allowance cannot be claimed to make a loss.
Allowable business expenses
Let's take a look at the allowable business expenses section of the tax return.
Only include in this section expenditure that is specifically allowed. The following are disallowed:
We'll explore each item in this section in more detail on the next screen. Before we do so, it's worth noting that if you don't wish to categorise the expenditure into boxes 11 to 19, you can simply enter the total into box 20.
There is also the facility to do this on the online return. The question asked is: 'How would you like to record your expenses? As a single total value, or as a detailed breakdown?'. If?the expenses are very high and a single total figure is entered, HMRC may flag the return for enquiry. Where it is possible to breakdown expenditure, it is advisable to do so.
Box 11 - This figure should be adjusted for opening and closing stock (inventory)
Box 12 - Any private usage must not be included
Some individuals find it better to claim pence per mile for business miles ate HMRC approved rates (in such a case the vehicle would not be owned by the business but by the sole trader so capital allowances - which we will look into later cannot be claimed)
Box 13 - Do not include amounts out by the owner of the business, referred to as drawings, as they are not allowable.
Include wages funded by funded by the Coronavirus Job Support Scheme (furlough payments made to employees).
Box 14 - The total in this box will include light and heat.
Box 15 - Do not include the costs of purchasing any fixed (non-current) assets or depreciation. You can include running and repair costs of any assets.
Boxes 16 to 18 - You can claim for business use of a private home, but ensure such a claim is reasonable, justifiable and proportionate. This figure can go into box 18.
You can use simplified expenses if you work for 25 hours or more a month from home, the rates for 2021/22 are shown in the image.
Box 19 - Client entertaining is not allowable, even if the entertainment directly led to new business. Include here staff entertaining for annual social events.
Box 20 - This is the total of all allowable expenses; the figures is automatically if you use the online return.
Capital allowances
Many businesses will purchase fixed (non-current) assets; for example, motor vehicles, plant and machinery, computer and office equipment. These items cannot be deducted as expenditure from trading income; instead they may be eligible for capital allowances.?
The items referenced above are known as plant and machinery.
Sole traders, partnerships and companies are all able to claim capital allowances.
There are many different capital allowances for plant and machinery which may be claimed, depending on the type of expenditure:
A. First year allowance (FYA)
The following expenditure will qualify for a first year allowance:
B. Annual investment allowance (AIA)
This allowance is available on most plant and machinery expenditure, except for cars.
C. The special rate pool
This includes:
D. The main pool
This will include expenditure on most items which are not in the categories above or classed as a private use or short life asset.
E. Short life assets
These are assets which are expected to be disposed of within five years.
F. Assets with private use
There are assets, such as cars, which are used for both business and private purposes.?
Rates for capital allowances on plant and machinery
There are different rates for capital allowances which are dependent on the category of expenditure, the rates for the 2021/22 tax year are:
A. First year allowance calculations
The first year allowance calculation is very simple as the rate is currently 100%. There are no restrictions on the amount that can be claimed and it is not reduced if the accounting period is for less than twelve months.
B. Annual investment allowance calculations
The calculation of the annual investment allowance may be a bit trickier to calculate as there are more rules to consider:
C. Asset pools
Below is the capital allowances section of the tax return. The details below have been extracted from the paper based tax return.?
Box 23 - The maximum annual investment allowance for 2021/22 is ￡1,000,000
Box 24 - This box allows relief if balances in the main pool or a special rate pool are below ￡1,000.
Instead of continually reducing by an increasingly small amount, it can be written off completely here.
Box 24.1 - The full cost of new and unused zero emission or electric cars.
Box 25 - This is the total of capital allowances claimed from the main pool, special rate pool, first year allowances (excluding any cars included in box 24.1), balancing allowances, short life assets and assets with private uses.
Box 25.1 - The structures and buildings allowance is separate from the other capital allowances calculations.
It is calculated at 3% per annum of the eligible expenditure on a building or structure that is used for a qualifying activity.
Refer following link for further details.
Box 25.2 - Freeports are designated tax sites (locations) where an enhanced Structures and Building Allowances of 10% may be claimed.
Refer following link for more information.
Box 26 - Balancing charges (BC) are created by the disposal of single pool assets. You need to calculate the difference between the sale proceeds (assuming sold at true market value) and the tax written down value (WDV) of the asset disposed.
Other adjustments
The taxable profit may not be the same as the net profit; the boxes below show some adjustments that may need to be made to the figures. The details below have been extracted from the paper based tax return.
Box 27 - Goods taken from stock for private purposes by the owner or connected parties must be entered here (unless they were paid for in full and that figure is the normal accounts).
Goods taken from stock must be valued at market sale value. Services are valued at cost the business.
Box 27.1 - These are the amounts that an individual was entitled to receive. Any amounts that are to be repaid are not included here.
Box 28 - This figure is automatically calculated in the online return.
Box 29 - Enter here any losses bought forward from previous years in the same trade.
These cannot exceed the profit put in box 28.
Box 30 - Include any other income not previously disclosed.
Box 31 and 32 - The figures in box 31 and 32 are automatically calculated in the online return.
Losses, Class 4 NIC and CIS deductions
The details for this section, shown below, have been extracted from the paper based tax return. The online pages look exactly the same.?
Box 33 to 35 - Trading losses can be claimed in the following ways:
-> for new businesses, this can be the previous three years.
-> for businesses ceasing to trade, this can be the previous three years.
Refer Helpsheet 227 provides further details.
Box 36 to 37 - Self - employed people aged from 16 to state pension age, usually pay Class 2 and Class 4 national insurance contributions.
If profits are less than ￡6,515, class 2 contributions are not payable, but they can be paid voluntarily to protect your state person and other benefits.
You do not have to pay Class 4 contributions if you were :
Box 38 - Subcontractors registered as self-employed with HMRC must enter here total deductions made by contractors from payments received in the tax year. The deductions are shown on the payment and deduction statements received from the contractor.
Make sure that the amounts included in turnover in box 9 are gross, i.e. before the deduction of income tax.
Self-employment (full)
The sections in the self-employment form (SA103F) are similar to those of the short form, with a few more details required for business details, business expenses, capital allowances and other adjustments.
For example, in the extract from the business expenses section provided below, there is an additional box for payments to subcontractors (where the gross amount is entered), and additional boxes for irrecoverable debts, advertising and depreciation and there are two columns, one for the total expenses, and one for disallowable expenses (included in total expenses).
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VAT
There are various ways to deal with VAT in the self-employment sections if the business is VAT registered. Select the options below to find out more.?
VAT registered business (standard scheme)
Partially exempt and zero-rated businesses
VAT changes during the accounting period
VAT flat rate scheme
Opening year rules
When a business starts to trade, HM Revenue and Customs must be notified. The basis period for the first tax year is as follows.
Year one
The date the business started to trade, up to the following 5 April.
Year one example
Andy started his business on 1 January 2022. His basis period is 1 January 2022 to 5 April 2022, which falls into the tax year 2021/22.
The rules become more complicated for the second tax year. However, if we ask a series of questions the basis period should become easier to identify.?
Question 1 - Is there a period of account ending in the second tax year?
Yes: go to question2.
No: the basis period is 6 April to 5 April in the second year.??
Question 2 - Is the period of account for 12 months?
Yes: the basis period is the period of account.
No: go to question 3.
Question 3 - Is the accounting period for less than 12 months?
Yes: the basis period is the first 12 months of trading.
No: the basis period is 12 months to the accounting date in the second tax year (if the accounting period will be for more than 12 months).
For the third tax year, the rules become simpler.?
Third tax year question:?
Is there a period of accounting ending in the second tax year?
Yes - The basis period is the accounting year end that falls into the third tax year, which is known as the current year basis.
No - The basis period is the 12 months to the accounting date in the third tax year.
Final year rules
In the final year of assessment when an individual ceases to trade, any profits that have not previously been assessed are added together and any overlap profits from the opening years are deducted.
End of basis period for previous tax year to cessation date less any overlap profits.
Self-employment full pages
In this section we'll look at the boxes that are not included in the short form.
Box 66 and 67 - Consider Andy : He started business on 1 January 2022 and has produced accounts to 31 December 2022.
Under the opening rules Andy's basis period starts on 1 January 2022 and ends on 5 April 2022.
Box 68 - Andy had profit of ￡24,000 for the year ended 31 December 2022.
The profits for nine months (April to December 2022) won't assessed in 2021/22, and will be deducted: ￡18,000 (￡24,000 * 9/12)
Box 69 and 70 - In 2022/23 Andy will be assessed on profits of ￡24,000 (year ended 31 December 2022). He has already been assessed on part of these profits in 2021/22: ￡6,000 (￡24,000 - ￡18,000).
The ￡6,000 is referred to as his overlap profit and will be entered into box 70 in 2022/23.
Box 70.1 - Enter the amount that the individual was entitled to receive.
Box 71 - If the taxpayer charged from the cash basis last year to the traditional method of accounting this year, then a transitional adjustment will need to be made. For example, a barrister using cash basis for a maximum of seven years, which will have changed to the normal accruals and prepayments systems.
Box 72 - The amount will be the difference in profit from the result of an averaging claim.
Partnerships
A partnership exists where two or more individuals run a business together (unless they have incorporated a limited company), sharing the risks and rewards.
A partnership tax return (SA800) must be completed by all partnerships. This includes a summary of the share of profits, losses or income allocated to each partner during any period for which they were a member of the partnership.?
The information in this return is used to complete the individual's tax return partnership pages.
There are two types of partnership pages:
All members of a partnership are jointly and severally responsible for completing the Partnership Tax Return (SA800). Penalties can be levied on each partner if the return is not filed on time.?
The sections to complete within the paper return are called 'SA104S - partnership short' or 'SA104F - partnership full'.?
If the online return is being completed, the sections will be automatically generated if 'yes' was selected for the question 'Were you in a partnership?'.
A separate page will need to be completed for each partnership held in the tax year.
Let's start to look at each section.
Partnership details
The details below have been extracted from the paper based tax return.
Box 1 - This is the partnership's UTR - Unique taxpayer reference
Boxes 3 and 4 - Box 3 and 4 only need to be completed if you have joined or left the partnership within the tax year.
The details below have been extracted from the paper based tax return.
Some of the details to be entered are the same as those covered in the self-employment pages; therefore we'll look at the areas that are different for partnerships.?
Boxes 6 and 7 - The general tax rule is that profits for a tax year are those which arise in the 12 months account period ending in that year; this is called the basis period.
For examples, accounts prepared for the year ended 31 December 2021 will be assessed 2021/22. If partners have joined or left in a tax year, their individual basis periods may not be the same.
Box 8 - This figure will be taken from the partnership tax return.
Box 9 - If the basis and accounting periods are different, any adjustments should be entered here.
Box 20 - After taking into account all adjustments and losses, the individual's share of taxable profits is entered here. This is automatically calculated in the online return.
Other aspects
We'll look at other areas of the partnership pages which may need to be completed slightly differently from other sections of the tax return.?
For all figures, enter only the individual's share from the partnership return. For example:
If partners share profits in the ratio 60:40 and receive an income of ￡1,000, the figures to be included in each partner's tax return are:
Partner 1 – ￡600
Partner 2 – ￡400
Untaxed Savings Income - Enter the individual's share only.
An adjustment may need to be made if the partnership accounting period and the individual's basis period are not the same.?
See Chapter 4 for further details.
Property - Enter the individual's share only.
An adjustment may need to be made if the partnership account period and the individual's basis period are not the same.?
See Chapter 4 for further details.
Foreign - Enter the individual's share only.
An adjustment may need to be made if the partnership account period and the individual's basis period are not the same.?
See Chapter 5 for further details.
Finally, let's consider capital gains and tax paid deductions.?
Capital gains
Any partnership capital gains should be entered into the capital gains pages.
See Chapter 7 for further details.
Tax paid and deductions
Partnership's tax paid and any deductions must be allocated between partners, and the individual's share will be included in their tax return.
Business receipts taxed as income of an earlier year
Sometimes monies will be received from businesses that have ceased to trade.
These details should be included in the "Business receipts taxed as income of an earlier year" on the Additional information (SA101) form.
There is also further guidance on the?HMRC website
Chapter 4 - Property and investment income
Individuals may receive income from savings, investments and property. In this module we'll look at how these types of income are treated.
Property income includes:
Some types of property income must be included in the self-employment pages, rather than the property pages, this includes:
Any income from property (including foreign property) up to ￡1,000 is exempt from tax and does not need to be reported on the tax return. The section to complete within the paper return is SA105, UK property.?
If the online return is being completed, the sections will be automatically generated if ‘yes’ was selected for the question: 'Did you receive any income from UK property, including income from land?'
UK property details
We’ll now start to look at the different sections of the UK property form. The details below have been extracted from the paper based tax return.?
On the online return there are two additional questions:
We’ll look at these definitions in the next section.
Boxes 1 and 2 - These two boxes are self-explanatory
Boxes 3 - If property is held jointly, only include the individual's proportion of the income and expenses.
Box 4 - This scheme allows property owners to let out furnished accommodation in their own home for up to ￡7,500 per annum, tax free.
Furnished holiday lettings
In order to qualify as a furnished holiday letting, the property must obviously be furnished and must meet the following conditions.
Location - The property must be within the UK or European Economic Area (EEA). This includes Iceland, Liechtenstein and Norway.
Length of letting - The property must actually be let commercially as holiday accommodation for 105 days or more during the year.
Availability - The property must be available for holiday letting on a commercial basis for 210 days or more during the year.
There is a period of grace exemption, which allows a property to be classed as an FHL even if the length of letting condition was not met e.g. due to Coronavirus ongoing restrictions. See?here?for more details.
Separate pages should be completed if you have a UK business and a business in the EEA.
The section below is from the paper based form.?
Separate pages should be completed if you have a UK business and a business in the EEA.
The section below is from the paper based form.
Boxes 5, 5.1 and 5.2
Box 5 - In addition to rent, this may include charges for services, such as laundry, cleaning, internet and heating. Include any taxable Coronavirus support payments (e.g. CJRS)
Box 5.1 - If income is greater than ￡1,000, the property income allowance of ￡1,000 can be claimed instead of allowable expenses and any other allowances that may be available. This may be beneficial if allowable property expenses are less than ￡1,000.
Box 5.2 - If total income from all properties is less than ￡150,000, the cash basis can be used. If the traditional accruals basis has been used this box must be selected.
Box 6 - This may include ground rents, business rates, Council Tax, water rates, insurance, cleaning and gardening services, property and furniture repairs. Include any wages funded by the Coronavirus Job Retention Scheme.
Box 7 - The interest and charges on loans and mortgages but excluding capital repayments and any interest on parts of the loan used for non-business purposes.
Box 8 - Include here management fees paid to agents for finding tenants, managing the properties and rent collection. Legal fees for the renewal of short lease or evicting a tenant are allowable. However, legal fees incurred with the first letting or subletting a property or for planning permission are not allowable expenses.
Box 9 - This will include stationery, travel, accountancy, telephone and other miscellaneous costs in connection with running the business.
If the income in box 5 is ￡85,000 or less, the total expenses can be entered here rather than split between the boxes above.
Also include any tax deducted by overseas authorities for an FHL in the EEA unless a foreign tax credit is claimed in the foreign pages.
Box 10 - Any personal expenses which have been included in boxes 6 to 9 must be added back here.
Box 11, 11.1, 11.2 and 12 - Any capital allowances and balancing charges can be claimed in the usual way. NB. 100% first year allowances are available on new or unused electric charge points for electrical vehicle.
Box 13 - This figure is automatically calculated in the online return.
Box 14 - Enter any unused losses from prior years from the same business. You can also add current year losses from a different (non-FHL) property business, which you wish to offset against this year's profit.
Boxes 15 and 16 - These figures are automatically calculated in the online return.
Box 17 - Enter any unused losses from current and prior years which have not yet been used.
Box 19 - This box should be selected if the property qualified as a furnished holiday letting in the pervious tax year, but has failed to reach the required number of letting days in this tax year and you would like it to be treated as an FHL.
Property income
In the following sections of the form, don't include furnished holiday lettings, real estate investment trusts or property authorised investment funds.
The section below is from the paper based form.
You can use the cash basis of assessment if total income from UK property is less than ￡150,000 for 2021/22.?
Boxes 20, 20.1 and 20.2 - Include the total rental income from all properties excluding UK & EEA furnished holiday lettings profits. Include income from:
If income is greater than ￡1,000, the property income allowance of ￡1,000 can be claimed instead of allowable expenses and any other allowances that may be available.
If total income from all properties is less than ￡150,000, the cash basis can be used. If the traditional accruals basis has been used box 20.2 must be selected.
Box 21 - If an individual has rental property in the UK but lives abroad, the tenants or the letting agents will need to operate the Non-resident Landlord (NRL) Scheme. They’ll need to deduct basic rate tax from any rental income before it is paid over unless HMRC has agreed the rent can be paid gross
Box 22 - If the property rental business income includes premiums paid for the grant of a lease and other lump sum payments, given in connection with the right to possession of a property, these payments are taxable on a special basis.
For leases over 50 years HMRC treat the entire premium as a capital receipt, and it’s therefore not part of your business income.
For leases up to 50 years HMRC treat the premium as partly capital and partly income; only the income element is included in this box.
Box 23 - Enter in this box any payment (or other benefit) you received as an inducement to take an interest in any property (other than your main home) for letting. (This is a "reverse premium")
Property expenses and other deductions
Allowable property expenses will include:
Capital expenditure isn't allowed as a deduction, this includes the cost of the property, improvements to the property and the cost of renovations carried out before the property was first let. Capital allowances on furniture and fittings can only be claimed if it qualifies as a furnished holiday let.?
An adjustment must be made for any private use of the property(ies).
Box 37 - If Rent a Room income has been included in total rents, the annual Rent a Room exemption figure can be entered here.
If the Rent a Room exemption is claimed, no other expenses in relation to the relevant rental can be claimed.
Box 39 - This is any loss brought forward that you want to reduce your profits.
Boxes 42 to 45
Box 42 - This box would be used if the loss was due to certain agricultural expenses and the property rental business includes land used for agricultural purposes, or the losses arise as a result of claims to capital allowances, see HMRC SA105 notes.
Box 43 - Any losses which have not been used and are carried forward to offset against future profits.
Box 44 - The finance costs relating to residential property, such as the interest on a loan can be used to calculate a reduction in income tax.
Box 45 - Include any unused residential property finance costs from this property business from earlier years.
Any unrelieved balance can be carried forward to future years of the same property business.
Income from savings and investments
Income from savings and investments include:
The sections to complete within the paper return are set out on page TR3 of the main tax return – SA100.
If the online return is being completed, the sections will be automatically generated if ‘yes’ was selected for the questions:
Did you receive any interest from UK banks, building societies or unit trusts?
Did you receive any dividends from UK companies, authorised unit trusts, open-ended investment companies or foreign companies (up to ￡2,000)?
The following less common types of income are included within other income (paper based form SA101):
Interest?– UK government securities (gilts), bonds, loan notes or similar securities issued by UK companies.?
Stock dividends or non qualifying dividends?– Stock dividends, non-qualifying dividends, dividends from UK real estate investment trusts or Property Authorised Investment Funds. Dividends from companies affected by the service company rules and manufactured dividends.?
Interest received
If any UK interest has been received it must be entered into these sections of the return. The exceptions are interest received from Individual Savings Accounts (ISAs) and National Savings Certificates, which are exempt from tax.
Interest from the following are included in a different section of the return:
The details below have been extracted from the paper based tax return.?
Box 1 - This box must be completed for UK interest received net, after tax has been deducted, usually at20%.
It will include amounts from banks, building societies, authorised unit trusts, open-ended investment companies and investment trust companies where the organisation continues to deduct income tax. Since April 2016 such institutions are not required to deduct tax at source.
However, some interest is still received net, for example from payment protection insurance (PPI)compensation and purchased life annuities.
Any reward savings received from bank or building society accounts are classified as an annual payment rather than savings interest, therefore they should be included in the "Other UK income "section of the tax return.
If there is more than one account, or a number of interest receipts, add them together and enter the total net interest received.
Box 2 and 3 - This box must be completed for all interest received gross, i.e. without tax deduction. This may include:
Box 2:
Box 3:
Dividends received
Dividends received are entered into this section of the tax return. The boxes shown have been extracted from the paper based tax return.
In this section, don't include the dividends listed below as they are included in other sections of the tax return.
Box 4 - Include the total of all dividends received from UK companies including from shares acquired through an employee share scheme.
Box 5 - In this box include other dividend distributions such as from authorised unit trusts, open endedinvestment companies and investment trusts. Enter the dividends as shown on the dividendvoucher.
If you have accumulation units or shares, the dividend is automatically reinvested, but you muststill include the dividend in box 5.
Do not include any amount shown as ‘equalisation’. This is a repayment of capital and should be deducted from the cost of the units or shares when calculating capital gains.
Boxes 6 and 7
Box 6: Foreign dividends (up to ￡2,000)
If the only foreign income was taxed dividends you can enter them in box 6 (rather than complete the foreign income section).
Box 7: Foreign tax deducted
Enter the sterling (￡) equivalent of the dividend of the foreign tax deducted here.
Gilts, bonds and the accrued income scheme
Now we’ll start to look at the different sections of the additional information form relating to interest and dividends.?
Box 1 - Include all income (after tax) from the following:
Box 2 - The total tax which has been deducted.
Box 3 - The gross amount (including tax).
Stock dividends, bonus issues of securities and redeemable shares
Details on stock dividends, non-qualifying distributions and loans written off.
Box 12 - A stock dividend is a dividend received as shares rather than as a cash dividend. The company will provide a dividend statement showing the cash equivalent which is entered in this box.
Boxes 13 and 13.1
Box 13 - Enter the amount received from a bonus issue of securities or redeemable shares.
Box 13.1 - A close company is one under the control of 5 or fewer participators (shareholders) or under the control of its directors. Where a loan or advance is made by a close company to a shareholder, director or associate is written off or released that sum is treated as dividend income.
Chapter 5 - Other income
In this Chapter we'll look at the less common types of income an individual may receive:
We'll start by looking at the tax treatment of UK residents who have foreign income, which includes:
The sections to complete within the paper return are SA106 – Foreign.
If the online return is being completed, the sections will be automatically generated if ‘yes’ was selected for the question:
‘If you received any foreign income, do you need to complete the foreign section?’.
Arising and remittance basis
UK residents are liable to tax on their worldwide income and will usually be taxed on the arising basis.
A. Arising basis
Income and gains of UK residents are taxed on the full amount of foreign income as it arises, whether or not the money is brought into the UK.?
If income is locked into a foreign country it is treated as not arising, and so not taxed, until it can be brought into the UK. It's then taxed when it can be extracted, at that time whether or not it's brought into the UK.
B. Remittance basis
People who are resident, but not domiciled, in the UK can elect to be taxed on a remittance basis. This means they are taxed on income and gains arising abroad if and when they are brought into the UK. This option is not available to a UK domiciled resident person. The rules are complex see?here?for more guidance.
Form SA109 - Residence, remittance basis etc, gives further details. It must be completed either using the paper version or using commercial software. The notes are available?here.
Unremittable income and foreign tax credit relief
We’ll now start to look at the sections of the foreign pages.
If your overseas income and gains have had foreign tax deducted, it may be possible to obtain relief from double taxation. Foreign tax credit relief (FTCR) is normally the best way to obtain such relief, but if you don’t want to or cannot claim it, you can deduct the foreign tax when calculating the amount of income and gains chargeable to UK tax. You can't do both.
For example, an individual receives interest from an overseas source of ￡3,000. Foreign tax has been deducted of ￡400.
Option 1: Not using FTCR (This would be claimed on Self Assessment forms, not on these pages.)
Income: ￡3,000
Foreign Tax: (￡400)
Income subject to tax at 20%: ￡2,600
Tax due : ￡520
Option 2: Using FTCR
Income: ￡3,000
Income subject to tax at 20%: ￡3,000
Tax due: ￡600
FTCR (foreign tax paid): ￡400
Tax now due: ￡200
Box 1 - Unremittable income is income which is ‘locked’ abroad for mostly political reasons. It may be difficult to bring income to the UK due to exchange controls or shortage of foreign currency in particular areas of the world.
Give in the ‘Any other information’ box on the main tax return full details of the country in which the income arose, the amount in foreign currency and any foreign tax paid.
Box 2 - This only needs to be completed if the accountants is doing the Foreign Tax Credit calculation. If this box is left blank, it means HMRC will do the calculations.
Income from overseas sources
On these the incomes are split into:
Column A - Enter the country code for the country in which the item of income arose.
The country codes are set out in the Foreign Notes.
Column B - Enter the amount of income before deducting any foreign tax or special withholding tax.
The income should be converted to sterling at the rate of exchange that applied at the time when the income arose, and the full amount reported in the relevant boxes whether or not it was brought into the UK.
Column C - Enter the amount, in sterling, of the foreign tax taken off on the income shown in column B.
The tax is the lower of the foreign tax withheld and the amount of tax credit allowed under any double taxation agreement.
Column D - This applies if the individual is taxable on the remittance basis
Enter the amount of any special withholding tax deducted from the income.
If any UK income tax has been deducted from the income this should also be included here, and please give further details in the ‘Any other information’ box on your tax return.
Column E - If you're claiming foreign tax credit relief for this income, put "X" in this box.
Column F - Enter the taxable amount. If you’re claiming foreign tax credit relief the amount here should be the same as the figure in column B.
If you’re not claiming foreign tax credit relief, the amount should be the amount in column B minus any amount in column C.
Income from land and property abroad
Income from furnished holiday lets within the European Economic Area (EEA) is entered on the UK property pages of the tax return. All other rental income from the EEA and all rental income from elsewhere in the world needs to be entered into these sections unless you pay tax on the remittance basis.?
The tax is due on the full amount of overseas rental income, whether you bring the income into the UK or not unless you're entitled to claim the remittance basis.
The boxes to be completed are the same as those for UK property (see Module 4), however, if property is held in more than one country a page must be completed for each country.
Property summary
Income from properties will be summarised in the same way as other foreign income in columns A to F below, with a line for each country.
Let's now look at the boxes for reporting the total figures.
Box 25 - This is the total of all adjusted profits or losses.
Box 26 - Enter here the total unused losses from earlier years that are available to be deducted from the overall profit or added to the overall loss.
Box 27 - If the entry in box 25 is a profit, deduct any unused losses in box 26 that you want to set off against profits (up to the amount in box 25), and enter the result here. If the entry in box 25 is negative (a loss) leave box 27 blank.
Box 28 & 29 - These are the totals of any tax that has been deducted.
Box 30 - Add up all the entries in column F and then take off any losses brought forward included in box26, which are to be set off against the total amount. Put the result in this box (enter ‘0’ if the result is negative).
Box 31 - In some cases, you can set off a loss against your total income for the 2021/22 tax year if the lossarises because of your claim to capital allowances.
Any loss to be set off must be either:
Box 32 - If you cannot use all your losses for 2021/22, you can carry the balance forward by filling in box32. The time limit for claiming is 5 April 2026.
Income declared elsewhere, capital gains and other overseas income
The final sections of the foreign pages contain the following:
A. Foreign tax paid on employment, self employment and other income
This section is completed if foreign tax credit relief is being claimed on income which has been included elsewhere in the return. Complete the following:?
Further details can be found in the ‘Foreign notes’.
B. Capital gains
This section should be completed if a foreign capital gain has been declared on the capital gains pages and you wish to claim foreign tax credit relief.?
C. Other overseas income and gains
This will include:?
Further details can be found in the foreign pages?notes.?
Life insurance gains
These details have been extracted from the paper based tax return.
The details to complete these sections will be found on a chargeable event certificate issued by a UK insurance company or a UK friendly society.?
See?here?for further details.
Trusts
The final part of this module relates to the sections of the tax return relating to trusts.
These sections should be completed if an individual:
The sections to complete within the paper return are SA107, Trusts etc.?
To complete the return online, commercial software must be purchased.
A trust is in place where assets are held legally on behalf of beneficiaries. Those holding the assets are Trustees and those entitled to the assets are beneficiaries. The person who placed the asset(s) in Trust is known as the Settlor. There are different types of trust, the most common of which are discussed below:?
Trusts: settlor
A settlor is someone who puts money or other assets into a trust or settlement. If the settlor is you, you will be taxable if:?
Bare trust
A bare trust is one where the beneficiary has an absolute right to the assets and income of the trust, though they are legally held by the trustee(s). For tax purposes any income arising is treated as belonging to the beneficiary.?
Discretionary and non-discretionary or iterest in possession trust
Discretionary trust:
Trustees use their discretion to make any distributions; a beneficiary has no absolute right to income or capital of a discretionary trust. For Income Tax purposes, maintenance and accumulation trusts are treated as discretionary trusts.
Non-discretionary trust or interest in possession
This is a trust where the beneficiaries have an absolute right or entitlement to the income (as it arises) but not to the capital of the trust.
Types of interest
R185
R185 forms are issued by personal representatives or trustees of estates and trusts.?
The details from these forms are transferred to the trust pages of the tax return (with the exception of income received from bare trusts and income from foreign trusts).
Certificate of tax deduction
This is confirmation that tax has been deducted from payments made.
Statement of income from a trust
The R185 (Trust Income) form is issued by trustees to inform beneficiaries of any income payments or entitlement from a trust.
The details from the form are transferred to the ‘Income from trusts and settlements’ section of the tax return.
Statement of trust income chargeable on settlor
The R185 (Settlor) form is issued by trustees to inform settlors of any income arising to a Trust in which the settlor retains an interest.?
The details from the form are transferred to the ‘Income chargeable on settlors’ section of the tax return.
Statement of income from estates
The R185 (Estate Income) form is issued by personal representatives to inform beneficiaries of any income arising from the residue of the estate of a deceased person.
The details from the form are transferred to the ‘Income from the estates of deceased persons’ section of the tax return.
Use an R185 (Trust Income) form
Below is the section from the tax return on income from trusts and settlements.?
The trustees, using form R185, are expected to use the “Nature of payment” section 1 to describe the payment made to the taxpayer, who will then interpret that and enter the relevant figure into the tax return accordingly.
Use an R185 (Settlor) form
The section of the tax return shown below is from the ‘Income chargeable on settlors’ section. The information below illustrates a hypothetical return.
Use an R185 (Estate Income) form
And the final section of the tax return is shown here: ‘Income from the estates of deceased persons’.
Chapter 6 - Tax relief and allowances
In this chapter we'll look at the allowances that may be available to individuals.
This will include:
We'll also look at tax reliefs that may be of benefit to certain individuals, relating to:
Finally, we'll look at less common tax reliefs available, income tax losses and patent royalty payments.
Note that trading allowances and property allowances may also be available and these are dealt with in:
Personal allowances
All UK residents are entitled to a personal allowance. This amount is deducted from total income to work out the individual's taxable income.
For 2021/2022, the personal allowance is ￡12,570. There is, however, an income limit of ￡100,000 for the personal allowance. As soon as the net taxable income exceeds ￡100,000 the personal allowance is reduced by ￡1 for every ￡2 earned above this threshold until the allowance is lost. This means there is no personal allowance when the net taxable income reaches ￡125,140.
Let's have a look at some examples:?
Corinne
Corinne has income of ￡26,070.
Her taxable income is therefore ￡13,500 (￡26,070 - ￡12,570).
Aiguo
Aiguo has income of ￡104,500.
His income exceeds the ￡100,000 threshold by ￡4,500, therefore his personal allowance is reduced by half of that figure and is ￡2,250 (￡4,500 ÷ 2). Aiguo's personal allowance is ￡10,320 (￡12,570 - ￡2,250).?
His taxable income is therefore ￡94,180 (￡104,500 - ￡10,320).
Rebecca
Rebecca has income of ￡140,000.
Rebecca's taxable income is ￡140,000.?Her income exceeds the ￡100,000 limit by ￡40,000, therefore her personal allowance is reduced by half of that figure (￡40,000 x 0.5 = ￡20,000).
This exceeds the personal allowance, so she will lose it altogether.
Personal savings allowance and dividends allowance
A. Personal savings allowance
The personal savings allowance is available to basic rate and higher rate taxpayers (but not additional rate taxpayers). It means that individuals are entitled to receive savings income (up to limit) which is tax free. Savings income includes interest, certain purchased life annuities, profits from deeply discounted securities, accrued income profits and gains from certain life insurance contracts.
The rates for 2021/2022 are:
B. Dividend allowance
The dividend allowance is available to all taxpayers. It means that individuals are entitled to receive dividend income (up to limit) which is tax free.
The rate for 2021/2022 is ￡2,000.
Blind Person's Allowance
Certain qualifying individuals can claim the Blind Person's Allowance (BPA). For 2021/2022 the allowance is ￡2,520.
In England and Wales there is a register of blind people, which is maintained independently from HMRC. To claim BPA an individual living in England or Wales must be on the register.
In Scotland and Northern Ireland, where there is no register, there is a discretionary system.?Medical support may be required. The test the taxpayer must pass is that the claimant must be unable to perform any work for which eyesight is essential.
If you're married or have a civil partner and can't use all of your Blind Person's Allowance, then mark box 15 (see below) on the tax return to transfer the unused part of the allowance to your spouse/civil partner, whether or not they are blind.?
Married Couple's Allowance
Taxpayers who are part of a marriage or civil partnership, one of whom was born before 6 April 1935, are entitled to the married Couple's Allowance (MCA).
MCA is different from the other personal allowances as it is a deduction in the tax bill of 10% of the allowance.
The maximum MCA for 2021/22 is ￡9,125 equating to a tax relief of ￡912.50.
The value of the MCA is gradually reduced for taxpayers earning above the income limit (￡30,400 for 2021/22) in the same way as the personal allowance is reduced.?However, this restriction is subject to a minimum allowance (￡3,530 for 2021/22).?
The MCA is included in form SA101 (Additional information) in the paper-based return.
Marriage allowance
A taxpayer whose income in the year to 5 April 2022 is no more than ￡12,570 may transfer ￡1,260 (10%).
As long as they were in that marriage or civil partnership for the whole, or part, of the 2021/22 tax year, were both born after 5 April 1935, and the the spouse or partner has earnings less than ￡50,000 (a basic rate taxpayer), then the transfer can be made.
Both Amina and Trudy are married, and neither of their spouses have any income in 2021/22.
Amina - Amina has income of ￡37,168 and her wife has ￡nil and pays no tax.
By the wife making an election to transfer part of her personal allowance to Amina, she will continue to pay no tax.
Amina will see her tax liability decrease by ￡252 (￡1,260 x 20%).
Trudy - Trudy has income of ￡50,410. Despite her husband receiving no income, Trudy's income is in excess of ￡50,270 (the basic rate limit for 2021/22), she is therefore a higher rate taxpayer, and the marriage allowance can't be claimed.
Pension contributions
In this section we'll look at paying into registered pension schemes and overseas pension schemes.
The sections to complete within the paper return are included in the main tax return (SA100 page TR4).
If the online return is being completed, the sections will be automatically generated if 'Yes' was selected for the question, 'Did you make contributions towards a personal pension or retirement annuity?'.?
Pension contributions
Where an individual has made contributions into a personal pension scheme, or a retirement annuity, those contributions must be entered into this section.?
Payments made into an employer's pension scheme, which are deducted from gross pay before tax is calculated, should not be included here as tax relief as it has already been given through the payroll.
The sections shown below have been extracted from the paper based return.?
Box 1 - Tax relief has already been given at source on the contributions as the amount to pay by the individual is after deducting 20% tax.
Enter the net amount plus the basic rate tax
Box 2 - Tax relief has been not given at source, as the contributions have been made gross.
Box 3 - Enter here any payments made by the individual into an employer's occupational pension scheme where tax relief was not given at source. This could be because the contribution was more than earnings from that employment or the contribution was made close to 5 April and employer was unable to deduct the contribution from gross pay.
Box 4 - Payments made to an overseas pension scheme which have not been deducted from pay before tax may be eligible for tax relief, and should be entered here.
Disclaimer - This content has been reproduced from AAT Lifelong Learning Portal and shared for educational purpose.
This series of chapter has been designed by AAT to help you complete all the Self Assessment tax forms for the 2021/22 tax year.?
The most common issues are covered, but AAT is aware that they can't cover every eventuality.
AAT recommend to you use the?HMRC (Her Majesty's Revenue & Customs) website?for comprehensive, up to date information. These modules should not be relied on as a substitute for such information.