Who needs to do a tax return?
I’m doing my first tax return: what do I need to know?
The goal of the self assessment tax return is working out how much you owe HMRC or, occasionally, what your refund is if you have overpaid tax. These calculations are usually done by HMRC based on the figures supplied by the taxpayer. The calculation document is known as an SA302.
HMRC’s calculation will automatically deduct any income tax it has already collected through PAYE, nonetheless, details of pay and tax deriving from a salary must be included in the return. Capital gains should also be reported. In addition, taxpayers can use the self assessment tax return document itself, the SA100, to claim any reliefs or allowances they are due.
Your tax bill will probably include payments on account. These are due by 31 January and 31 July and relate to the tax year that ended between these two dates. Essentially, HMRC does not want to have to wait until the January after the tax year ends in April to receive your income tax.
So, if you know what your gross income is, how do you work out how much tax you pay? These sample calculations set out the process. The first includes the trading allowance and the second mortgage finance costs tax relief and allowable costs. Other reliefs and allowances that are potentially available have not been included as these will vary from taxpayer to taxpayer.
Example – basic rate self assessment calculation
Jack has a part-time job and also works as a sole trader. During the 2024–25 tax year he earned £20,000 from his job and paid tax through PAYE of £1,484.
He earned profits of £8,000 as a sole trader and claims the £1,000 a year trading allowance.
Now that the 2024–25 tax year has ended he sets about doing his tax return. He includes all his employment income and tax deducted through PAYE and his profits from self-employment.
His tax calculation will look like this. (As he pays national insurance through his employer he does not make any contributions from his self-employment.)
Tax calculation
£
Employment income – 20,000
Self-employment profits – 8,000
Total income – 28,000
Less personal allowance – 12,570
Less trading allowance – 1,000
Total income on which tax is due – 14,430
Income tax due at 20% – 2,884
Minus tax deducted via PAYE – 1,484
Total income tax due by 31 January 2026 is £1,400 minus any payment on account
Example – higher rate self assessment calculation
Jackie has a full-time job paying £47,000 a year and is a landlord. She receives rent of £1,500 a month or £18,000 a year. Her interest-only mortgage on the flat is £600 a month or £7,200 a year and the service charge is £165 a month, or £1,980 a year. She also had a one-off plumbing bill to settle of £600.
Tax calculation
£
Employment income – 47,000
Income from property – 18,000
Total income – 65,000
Higher rate tax of 40% is levied on incomes above £50,270
Jackie is able to get 20% tax relief on her mortgage costs:
£7,200 × 0.2 = £1,440
She can also deduct the service charge of £1,980 a year and the plumber’s bill of £600 from her taxable income, which taken together total £4,020. She cannot claim the £1,000 a year property allowance because she is claiming for actual expenses.
Her taxable income from the flat is therefore:
£18,000 – £4,020 = £13,980
So her total taxable income is:
£61,400
– £12,570 personal allowance
= £48,830
Basic rate tax of 20% on the first £37,700 of this = £7,540
Higher rate tax of 40% on the remaining £11,130 = £4,452
Tax bill = £11,992
She has already paid £6,884 of income tax on her job.
£11,992 – £6,884 = £5,108
Jackie will have to pay £5,108 on her self assessment. If her income is constant year to year, it is likely she will pay about half this on her first payment on account in January and the rest in July on her second payment on account.
Tax refunds
Sometimes miscalculations occur and people pay too much tax on account. This may be because their payments on account were based on their income from the previous tax year and their income in the current one has fallen.
Alternatively, people who do their self assessment themselves may have not claimed all the allowances they are entitled to. These could be employment-related expenses, or expenses relating to working at home or for running a car.
You can claim refunds for up to four years, and on any of your incomes, not just from employment.
The P800 tax calculation letter from HMRC will tell people if they are due a refund. A refund can still be claimed by people who don’t receive a P800 by contacting HMRC directly.
If your P800 identifies a refund, you should go to your Government Gateway account and request it be paid into your bank account. This should usually take about five days.
If you have further questions about self assessment or would like advice about any aspect of tax or your business, please contact Finsbury Robinson. We are a full-service tax, accountancy and business advisory firm, and our friendly and highly experienced team is available on 020 8858 4303 or via email at info@finsburyrobinson.co.uk
[ENDS 15.07.2025 Angus Walker]
