Self Assessment is the tax return system for income that is not fully taxed at source through PAYE. For sole traders, landlords, partners in partnerships, directors of companies (where receiving dividends), and several other categories, Self Assessment is an annual obligation. The system looks straightforward — declare income, deduct expenses, calculate tax — but the edges (payments on account, home office apportionment, CGT, Section 24, time-to-pay) catch out filers routinely.
This guide covers Self Assessment for UK individuals. Each spoke addresses one specific area where filers most often need additional clarity.
The 31 January deadline is firm
Self Assessment online returns and the related tax payment are due by 31 January following the end of the tax year. Late filing triggers a £100 fixed penalty automatically; late payment triggers interest from day one. The escalator runs through £900 daily charges and percentage surcharges if the return remains unfiled.
Who needs to file Self Assessment
Self Assessment is required for individuals who fall into any of these categories:
- 1Self-employed sole traders with gross income above £1,000 (after the trading allowance).
- 2Landlords with rental income above £1,000 (after the property allowance).
- 3Partners in a partnership.
- 4Directors of limited companies who receive dividends or other income beyond salary already taxed under PAYE.
- 5High earners with income above £150,000 (in some circumstances even where all PAYE-taxed).
- 6Anyone with capital gains above the annual exempt amount.
- 7Anyone with foreign income.
- 8Anyone who has received a notice from HMRC requiring a return.
Key dates and deadlines
| Deadline | Action |
|---|---|
| 5 October following the end of the tax year | Notify HMRC if you need to file Self Assessment for the first time |
| 31 October following the end of the tax year | Paper return deadline |
| 31 January following the end of the tax year | Online return deadline AND tax payment due |
| 31 July following the end of the tax year | Second payment on account due (if applicable) |
| Within 60 days of completion | CGT return for residential property disposals (separate from main return) |
Payments on account
Where prior-year Self Assessment liability exceeded £1,000 and less than 80% was deducted at source, HMRC requires payments on account towards the next year's liability:
- First payment on account: due by 31 January (alongside the prior year balance).
- Second payment on account: due by 31 July.
- Each payment is 50% of the prior year's tax liability (estimated forward).
- Balancing payment (or refund) due 31 January following the end of the tax year.
Payments on account can be reduced if you reasonably expect the current year's tax to be lower (reduced trade, lower earnings, etc.). The reduction is requested via the SA303 form or online. Setting reductions too low triggers interest if the actual liability turns out higher.
Use of home as office
Sole traders and self-employed individuals working from home can claim a portion of household running costs. Two methods:
- 1Simplified method: flat-rate per month based on hours worked from home (£10 for 25-50 hours/month, £18 for 51-100, £26 for 100+). Simple, defensible, no apportionment needed.
- 2Actual cost method: apportion utility bills, council tax, mortgage interest, and rent based on rooms used and time spent. More complex but can be larger where home use is substantial.
For most home-working sole traders, the simplified method is the cleaner choice. Actual cost matters when the workspace dominates a large portion of the home or where heating/lighting costs are substantial.
Time to Pay arrangements
Where a Self Assessment liability cannot be paid in full by 31 January, a Time to Pay (TTP) arrangement spreads the cost over up to 60 months. For debts under £30,000, TTP can be set up online without requiring a full financial disclosure. For larger amounts, formal negotiation with HMRC Debt Management is required. Setting up TTP before the missed deadline keeps the position cleaner than waiting for HMRC enforcement.
CGT on Self Assessment
Capital gains above the annual exempt amount (£3,000 for 2025-26) are reported on Self Assessment (or via the Real Time Capital Gains Service for one-off significant gains). Key points:
- Annual exempt amount: £3,000 (reduced from £6,000 in 2023-24 and £12,300 before).
- CGT rates (post October 2024 Budget): 18% basic-rate, 24% higher-rate (residential property kept at 18%/24%; other gains rates rose).
- Residential property disposals: separate 60-day return required within 60 days of completion. Tax paid then; reconciled on the eventual Self Assessment.
- Crypto: chargeable disposals include crypto-to-crypto trades.
Section 24 mortgage interest restriction
Since April 2020, individual landlords cannot deduct mortgage interest as a regular expense on residential rental income. Instead, mortgage interest produces a 20% basic-rate tax credit. For higher-rate taxpayers, this is materially less generous than the previous full deduction. For limited company landlords, Section 24 does not apply — full deduction continues. This is one driver of the recent shift toward incorporated property businesses.
Self Assessment return needs preparation?
A Harrow Self Assessment specialist will prepare the return, claim every legitimate deduction, and arrange Time to Pay if needed. Free initial assessment.