Introduction to Self-Assessment
The UK Self-Assessment tax system is a way for HM Revenue & Customs (HMRC) to collect Income Tax from individuals and businesses who don’t have their tax automatically deducted from wages or pensions. If you’re self-employed, a landlord, a company director, or receive income from savings, investments, or overseas sources, you may need to file a Self-Assessment tax return each year. The process involves declaring all your income sources—both large and small—so HMRC can accurately calculate what you owe. Failing to declare every type of income could result in penalties or unexpected tax bills later on, making it crucial to be thorough and honest when completing your return. Whether you’re new to Self-Assessment or just need a refresher, understanding what needs to be declared is key to staying on the right side of UK tax law.
Earnings from Employment and Self-Employment
When it comes to your Self-Assessment tax return in the UK, one of the first things HMRC expects you to declare is your income from both employment and self-employment. This includes your salary, wages, bonuses, freelance gigs, and any money earned from running a small business—even if it’s just a side hustle. If you work for an employer, you’ll receive a P60 at the end of each tax year. This form summarises your total pay and the tax that’s been deducted. If you’ve left a job during the year, make sure to keep hold of your P45 as well. For those earning money through self-employment—whether you’re freelancing, consulting, or selling homemade crafts—you’ll need to keep records of every invoice you issue and all payments received.
What to Declare
| Type of Income | Examples | Documentation Needed |
|---|---|---|
| Employment | Salary, wages, bonuses, overtime | P60, P45, payslips |
| Self-Employment | Freelance projects, consultancy fees, sales from Etsy/eBay shops | Invoices issued/received, bank statements |
Top Tips for Gathering Your Documents
- Ask your employer for missing P60s: If you didn’t receive a P60 or have misplaced it, contact HR—they can usually provide a replacement.
- Organise invoices by date: Keep digital or printed copies of all invoices in folders sorted by month or client. This makes things much easier when filling out your Self-Assessment.
- Use expense tracking apps: Apps like QuickBooks or FreeAgent can help you track income and expenses in real time, so nothing slips through the net.
- Don’t forget cash payments: Even if you were paid in cash for a job or gig, it still needs to be declared on your tax return.
A Note for Side Hustlers
If you earn more than £1,000 in self-employed income during the tax year (outside of PAYE jobs), you must declare it—even if it’s just occasional babysitting or selling on Vinted. Staying organised means less stress when the Self-Assessment deadline rolls around!
3. Income from Property
If you earn money from letting out property in the UK, it’s important to know that all forms of rental income must be declared on your Self-Assessment tax return. This includes traditional buy-to-let properties, rooms rented to lodgers in your main home, and even holiday lets advertised on platforms like Airbnb. Failing to report this income can lead to penalties from HMRC.
What Counts as Property Income?
Property income covers any money you receive for renting out residential or commercial spaces. Whether you own one flat or a portfolio of houses, or just rent out a spare room, you need to include these earnings. Even if you rent out your property for only part of the year—such as during school holidays—it still counts. If you have a lodger, remember that the Rent a Room Scheme allows you to earn up to £7,500 tax-free per year, but any amount above this threshold must be reported.
Buy-to-Let and Holiday Lets
Buy-to-let landlords must declare all rental payments received from tenants. For those with furnished holiday lets, special tax rules apply, but you still need to disclose all profits. Keep in mind that short-term lets may also require additional council permissions and adherence to local regulations.
Practical Record-Keeping Tips
To make life easier when it’s time to complete your Self-Assessment, keep organised records throughout the year. Save receipts for expenses like repairs, letting agent fees, insurance, and utility bills if you pay them on behalf of tenants. Maintain clear records of rent received, dates of occupancy, and any void periods when the property was empty. Using a simple spreadsheet or digital app can help prevent costly mistakes and ensure you don’t miss out on allowable deductions.
4. Interest, Dividends, and Investments
When completing your Self-Assessment in the UK, its essential to declare all forms of income earned from interest, dividends, and investments. This includes any money received from UK banks, building societies, shares, and other investments. Not all interest or dividend income is tax-free, so knowing what counts as taxable is key to staying on the right side of HMRC.
Interest from Banks and Building Societies
If you earn interest from savings accounts held with UK banks or building societies, this usually needs to be declared. While the Personal Savings Allowance lets basic rate taxpayers earn up to £1,000 of interest tax-free (£500 for higher rate taxpayers), anything above this threshold must be included on your Self-Assessment.
Taxable Interest Income Sources
| Type of Account/Investment | Taxable? |
|---|---|
| Savings Accounts (UK banks/building societies) | Yes, if above allowance |
| ISAs (Individual Savings Accounts) | No, tax-free |
| Fixed-rate Bonds (non-ISA) | Yes |
| Peer-to-peer Lending Platforms | Yes |
Dividends from Shares and Investments
If you hold shares in UK companies or receive distributions from investment funds, these dividends may be taxable. The Dividend Allowance allows you to receive up to £1,000 in dividend income tax-free (2023/24 tax year). Any dividends above this must be reported and taxed according to your income band.
Dividend Tax Bands (2023/24)
| Band | Tax Rate on Dividends Above Allowance |
|---|---|
| Basic Rate | 8.75% |
| Higher Rate | 33.75% |
| Additional Rate | 39.35% |
Other Investment Income You Must Declare
This category also covers income from unit trusts, open-ended investment companies (OEICs), and some types of bonds. Always check your annual statements or speak with your provider if youre unsure about whether a particular income source needs declaring.
5. Foreign Income and Overseas Assets
If you work abroad, have bank accounts overseas, or receive foreign dividends, its essential to understand your obligations for UK self-assessment. HMRC requires you to declare all foreign income, even if youve already paid tax on it in another country. This includes wages from overseas employment, rental income from properties abroad, interest from non-UK bank accounts, and dividends from foreign investments.
To avoid paying tax twice on the same income, the UK has double taxation agreements (DTAs) with many countries. These agreements often allow you to claim relief or a credit for tax already paid elsewhere. However, it’s your responsibility to check whether a DTA applies to your situation and keep records of any foreign taxes paid.
When reporting foreign income, you’ll need to fill in the ‘foreign’ section of your self-assessment tax return. Make sure you have all relevant documents handy—such as payslips, dividend vouchers, and statements from overseas banks. For those living or working abroad but still classed as UK residents for tax purposes, remember that worldwide income must be reported.
If your situation is complex or youre unsure about what needs declaring, it can be worth consulting an accountant familiar with international tax rules. Getting things right will help you stay on the right side of HMRC and avoid unnecessary penalties.
6. Other Notable Sources (Grants, Benefits, Pensions)
When filling out your Self-Assessment in the UK, its not just your salary or freelance income you need to think about. There are several other sources of income that HMRC expects you to declare, even if they seem small or unconventional. This includes grants, state benefits, pensions, and even things like cashback or referral bonuses.
Declaring Grants and Support Payments
If youve received any grants—whether for business support, education, or personal reasons—these might be taxable depending on their nature. For example, COVID-19 support grants or self-employment income support must be reported. Always check if the grant you received is subject to tax and include it in your return.
State Benefits That Count as Taxable Income
Some state benefits in the UK are taxable and should be included in your Self-Assessment. Examples include Jobseeker’s Allowance, Carer’s Allowance, and certain types of Employment and Support Allowance (ESA). While many benefits like Child Benefit or Universal Credit are not taxable, its essential to double-check which ones apply to you to avoid underreporting.
Pensions: State and Private
If you receive a state pension or a private/company pension, this income is generally taxable and must be declared. Even if tax has already been deducted at source, you still need to report the gross amount received during the tax year so HMRC has a complete picture of your finances.
Other Miscellaneous Income: Cashback & Referral Bonuses
It may surprise you that even relatively minor windfalls such as cashback from credit cards, bank accounts, or referral bonuses from apps and services can count as taxable income. While small amounts often go unnoticed, regular cashback or high-value referral rewards should be declared if they form part of your overall earnings for the year.
Stay on Top of All Your Income Streams
To stay compliant with HMRC rules and avoid nasty surprises later, keep track of all these additional income streams throughout the year. Maintain records of any grants received, benefits claimed, pension payments, and even those little extras like cashback. That way, when it comes time to file your Self-Assessment, youll have everything ready to hand—and possibly save yourself some money by getting it right first time.
7. Common Pitfalls and Money-Saving Tips
When tackling your self-assessment in the UK, it’s surprisingly easy to make mistakes that could either land you in hot water with HMRC or mean you’re paying more tax than you should. Here are some of the most frequent errors, along with practical, everyday tips to help you save money and keep your self-assessment process as smooth as possible.
Common Mistakes to Avoid
Missing Out Income Sources
A common pitfall is forgetting to declare all sources of income. This includes side hustles like online selling (eBay, Vinted), freelance work, rental income—even if it’s just a room in your home through the Rent a Room Scheme. Remember, even small amounts count and HMRC is getting smarter at spotting undeclared income.
Incorrect Expense Claims
Another mistake is claiming for expenses that aren’t allowed. For example, only certain business-related costs can be deducted if you’re self-employed. Over-claiming can trigger an HMRC enquiry, while under-claiming means you’re missing out on legitimate savings.
Missing Deadlines
Late filing or payment leads to automatic fines and interest—no one wants to pay extra because they missed a date! Mark those deadlines clearly in your calendar and set reminders on your phone.
Money-Saving Tips
Stay Organised Year-Round
Keep track of all your income and receipts from day one. A simple spreadsheet or free apps like HMRC’s own tool can help. Staying organised means less stress come January and ensures you don’t forget anything important.
Make Use of Allowances
Don’t overlook tax-free allowances such as the Personal Allowance, Marriage Allowance, or the Trading Allowance for side hustlers. If you rent out a room, check if you qualify for the Rent a Room relief—this could mean up to £7,500 tax-free income each year.
Claim All Legitimate Expenses
If you’re self-employed or have property income, make sure you claim every allowable expense—from stationery to a proportion of your home bills if you work from home. Every little helps!
Seek Help If Unsure
If you’re not confident about what needs declaring or what counts as an expense, don’t be afraid to ask for help. Free advice is available from HMRC and many local charities offer support sessions during tax season.
Avoiding these common pitfalls and following these everyday money-saving tips will not only make your self-assessment less stressful but could also leave more pounds in your pocket at the end of the tax year.
