Self-assessment is an applied mechanism of collecting income tax from self-employed and business owners by the HMRC. It is essential for every UK national and overseas working there to pay tax on their earnings and file an income tax return that relevant authority once before the end of every tax year. As the UK is moving towards the digitalization of the taxation system and has applied the make taxes digital scheme, income tax return filing is also a main feature of the MTD.

Key features of the Self-assessment tax system:

Under the MTD scheme by the HMRC, the self-assessment tax system has enforced for the income tax collection and making it easy for taxpayers to calculate and pay taxes with ease. Due to the following features of this taxation system, the UK government has increased its tax net in the preceding years according to the latest studies on the impacts of the self-assessment tax system.

Simple tax payment and return filing procedure

The purposes of the self-assessment system are to provide ease to taxpayers in filing returns and paying taxes based on the prepared tax forms by the HMRC. This system is established to provide the basic but necessary knowledge of taxation to the public in order to make the system understandable for them and enable them to file rightly filled returns.

Easy amendments in the filed returns:

Before the enforcement of this taxation system, taxpayers were unable to make amendments in their filed tax returns in case of inaccuracies that result in the heavy penalties and surcharges. This system has enabled them to make amendments in their online filed tax returns to provide the most accurate facts and figures to avoid any sort of penalties and surcharges.

Communication of doubts

Although in the previous taxation system of manual tax returns, the facility of communicating doubts was also included, but in the modern self-assessment tax system, this feature is made more exclusive and requires more details in order to deal with the raised doubts effectively. One will also be bound to provide sporting documents to make his case strong and get relaxations.

The reduced role of revenue commissioners

In the modern tax system in the UK, taxpayers are liable to complete their self-assessment segment in the tax returns through the Online Revenue system to avoid penalties. Previously, revenue commissioners were liable to issue a notice of assessment to taxpayers, but now the digitalized taxation system has reduced the role of revenue commissioners as now taxpayers will get only receipts of their filed returns instead of notices.

Fairly application of penalties

One of the features of the modern self-assessment system is the fair application of the penalties and surcharges in order to keep taxpayers avoiding wrong or late submissions of their income tax returns. This feature of the system can be considered as the major reason for its success.

Who is liable to pay income tax?

Every UK domiciled person and overseas living there for three consecutive tax years are liable to pay income tax on the income from different sources, including employment, self-employment, pensions, social security benefits, trusts, dividends, rents, and interest on savings with a particular tax rate. Under the taxation regulation in the UK, there is no minimum age rule, but the matter is the amount of your chargeable income from any of the taxable sources.

The income tax rate for different income levels:

Income tax rate band depends on the earnings or income of an individual or business. Pound 12500 is a set threshold by the HMRC, and one is not liable to pay tax until he/she is earning this amount of below in a tax year, as under the UK laws, it falls in the personal allowance category. From Pound 12501 to Pound 50000, the basic tax rate of 20% will be applicable to the taxpayer, and from Pound 50001to Pound 150,000 40% tax rate band will apply. On the income above the Pound 150,000, an additional tax rate of 45% will apply to taxpayers to pay income tax accordingly and file accurate returns. If your annual income falls under any of the taxable bands, you are bound to pay according to the tax rate of the respective band.

When to file a tax return?

Under the taxation regulation of the country, one is bound to pay tax and file returns within the specified deadlines by the HMRC. In the UK, a tax year starts from April 6 and ends on April 5, and every taxpayer is required to pay income tax before ending a tax year. One who fails to meet the deadline can face a penalty of Pound 100 on up to 3 months late. After 3 months, the interest on the penalties will apply according to the regulation of the self-assessment tax system of HMRC. One can also have the right to appeal against the charged penalty if one has reasonable defenses. With the help of accounting and VAT registration services in the market, SAS becomes easier to manage such taxation affairs more efficiently.

The above discussion about the features and regulations of the modern self-assessment system enables us to understand the nature and the effectiveness of this system. One can conclude that the self-assessment tax system is an online mechanism for the collection of the income tax and provide every possible ease to taxpayers in filing income tax returns and paying tax bills without facing any troubles and complexities of the traditional taxation systems. The automated system has made it very easy for taxpayers to estimate their taxes payable within the deadlines and requirements without losing focus on their daily businesses.