How much do I need to earn to file a tax return? – TaxScouts

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How much do I need to earn to file a tax return?

We've updated this guide on 5th March 2021

If you’re a sole trader or the director of a limited company, then it’s likely that you’ll have to file a tax return. 

Once you start earning over a certain amount, you’ll be required by law to complete what’s known as a Self Assessment. HMRC will need to know how much you earned, even if the money you earn falls below various tax allowances that you’re claiming. 

There are a few exceptions to this rule. But generally, if you’re earning money outside full-time employment, prepare yourself to have to complete Self Assessment. Take a look at our guide below on everything you need to know about tax returns.

So how much do I need to earn to file a tax return?

As a general rule, if you earn more than £1,000 of untaxed income during a tax year, you will have to do a tax return.

How will I know if I need to file a tax return?

Most working people in the UK pay all their tax ‘at source,’ through what’s known as Pay As You Earn (PAYE). This tax is automatically deducted from your wage before you receive your monthly/weekly payment from your employer. 

If this is you, it’s unlikely you’ll have to complete a Self Assessment tax return. But, there are a few exceptions to this as we’ll explain below. 

If you fall into one of the following categories, you’ll almost always have to file a tax return:

  • You’re self-employed
  • You earn more than £100,000 per year
  • You’re a landlord
  • You claim tax relief on your pension
  • You’ve made money from an investment
  • You earn money from side jobs alongside your main employment

It’s my first time. Help!

If you’ve never done a tax return before but now you think you might have to, the first step to take is to register for Self Assessment. This is how you let HMRC know that you’re earning untaxed income. The deadline to do this is the 5th October in any given year. 

When it comes to actually paying your tax return, you should do this by 31st January the year after the tax year you’re paying for. For example, if you’re paying your 2020/2021 tax return, this should be done and paid for by the 31st January 2022.

And isn’t there a tax allowance?

Yes! In fact, there are lots. What you can claim depends on the reason you’re doing a tax return. 

These are just a few but check out a bigger list of schemes and allowances here. 

How much will I pay?

How much tax you’ll pay will depend on a number of factors, such as how much you earn and what expenses you can claim for. If your self-employed work accounts for your full-time income, then you’ll be required to pay:

  1. Income tax
  2. National Insurance 

National Insurance must be paid, even if you earn below the Personal Allowance threshold. If you’re not sure what NI contributions you need to make, you can work it out yourself. Try our National Insurance Calculator!

Annual self-employment income
£
Self-employment expenses
£
Select tax year
How NI is calculated on your income
No contributions
£9,500
At 9%
£39,500
NI contributions you need to make
£3,714
Class 2 NI: £159
No Class 4 NI on your first £9,500
Class 4 NI at 9% on your next £39,500: £3,555
You also need to pay income tax
£7,300
View how the income tax is calculated

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How your National Insurance contributions are calculated

As a self-employed you have to pay your National Insurance contributions yourself during your annual Self Assessment, together with any income tax you might owe.

National Insurance breakdown

You pay no NI contributions on the first £9,500 that you make.

You will need to pay Class 2 NI worth £159.

You will also have to pay £3,555 (9%) on your income between £9,500 and £49,000.

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