There’s only just over one month left to register for self-assessment tax return with HMRC – and pay any extra tax you owe through your employer with a tax code change.
Every year, HMRC asks workers who have additional income, such as from a rental property or self employed side hustle, to declare and submit a self-assessment tax return.
The deadline for the return is January 31 online but if this year is the first year you need to submit one, the deadline to register for this year is coming up fast: October 5.
If you register on time and submit a self-assessment by the end of December, you can then opt to pay any tax you owe through your wages via PAYE if you meet certain conditions.
This will involve HMRC changing your tax code with your employer and recouping the money directly from your wages.
HMRC says: “You can pay your Self Assessment bill through your PAYE tax code as long as all these apply.
“You owe less than £3,000 on your tax bill (you cannot make a part payment to meet this threshold); You already pay tax through PAYE, for example you’re an employee or you get a company pension; you submitted your paper tax return by 31 October or your online tax return online by 30 December.
“HM Revenue and Customs (HMRC) will automatically collect what you owe through your tax code if you meet all 3 conditions, unless you’ve specifically asked them not to (on your tax return).”
The most common tax code for tax year 2024 to 2025 is 1257L. It’s used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).
The numbers in an employee’s tax code show how much tax-free income they get in that tax year.
You usually multiply the number in the tax code by 10 to get the total amount of income they can earn before being taxed.
For example, an employee with the tax code 1257L can earn £12,570 before being taxed. If they earn £27,000 per year, their taxable income is £14,430.
The letter K is used in an employee’s tax code when deductions due for company benefits, state pension or tax owed from previous years are greater than their Personal Allowance and this may apply to your tax code if you choose to pay owed tax to HMRC in this way.
Multiply the number in their tax code by 10 to show how much should be added to their taxable income before deductions are calculated.
An employee with tax code K475 and a salary of £27,000 has taxable income of £31,750 (£27,000 plus £4,750).
HMRC warned: “Anyone who needs to complete a Self Assessment tax return for the first time to cover the 2023 to 2024 tax year, should tell HM Revenue and Customs (HMRC) by 5 October 2024.
“HMRC urges customers to file their return early to provide peace of mind and to also allow time to consider opportunities to spread the cost of their tax bill, claim refunds earlier and avoid costly errors caused by rushing.
“Customers need to keep records to fill in their tax return correctly and they may be asked for documents if HMRC checks their return. Penalties may be issued if records are not accurate, complete and readable. Self-employed workers must also keep records for their business income, outgoings and make sure they are registered with HMRC as self-employed.”
