Self-assessment: who must file and how

Whether you freelance on the side, earn rental income, or simply earn above a certain threshold, you may need to file a self-assessment tax return in the UK. For many newcomers to Britain, the system is unfamiliar: it requires you to register, calculate your own tax, and pay it in instalments. Missing deadlines or misunderstanding the rules can quickly lead to penalties and stress.

Who must register for self-assessment?

In the UK, most employees pay tax automatically through the Pay As You Earn (PAYE) system. But if you receive income that has not been taxed at source, HMRC requires you to register for self-assessment and file an annual return. You need to register if you are self-employed as a sole trader, earn income from property or land rentals, receive dividends or investment income above certain thresholds, receive foreign income, need to declare Capital Gains Tax, are a partner in a business, or are a company director with additional income not fully taxed through PAYE. High earners with income over £100,000 per year must also file, as must parents who need to repay the High Income Child Benefit Charge if their income exceeds £60,000.

The £1,000 trading allowance

If you have casual or small self-employment income, HMRC offers a £1,000 trading allowance. This is a tax-free exemption that applies to gross income, meaning the total you earn before deducting any expenses. If your trading income for the tax year is £1,000 or less, you do not need to register or pay tax on it, and in most cases you do not need to file a self-assessment return. This allowance is designed for people with side hustles, selling items on platforms like eBay or Etsy, or earning money from tutoring, freelance work, or other small-scale activities.

If your trading income exceeds £1,000, you must register and file a return, but you can still use the trading allowance. You may choose to either deduct your actual business expenses from your income, or apply the £1,000 allowance as a flat deduction, whichever gives you the lower taxable profit. You cannot do both. For example, if you earned £3,000 and your expenses were £600, claiming the trading allowance would leave you with taxable profit of £2,000, whereas claiming expenses would leave you with £2,400. In this case, the allowance saves you more. Important: this is separate from your Personal Allowance of £12,570, which every taxpayer receives.

Key deadlines: registration and filing

The self-assessment system works on tax years that run from 6 April to 5 April the following year. So the 2025 to 2026 tax year began on 6 April 2025 and ends on 5 April 2026. Once that year ends, you have specific deadlines to register and file.

5 October: registration deadline

If you need to file a self-assessment return for the first time, you must register with HMRC by 5 October following the end of the tax year. For example, if you started earning untaxed income during the 2025 to 2026 tax year, you must register by 5 October 2026. HMRC needs this time to process your application, issue your Unique Taxpayer Reference (UTR), and send you activation codes by post. Your UTR is a 10-digit number that stays with you permanently. You will need it to log in and file your return every year.

Registration usually takes 15 to 30 minutes online, but it can take 10 to 21 working days for your UTR to arrive by post. Missing the 5 October deadline does not prevent you from registering late, but it compresses your timeline and may trigger penalties if the late registration causes you to miss the filing deadline. If you register late, HMRC can still process your application and will typically give you a three-month window from the date of registration to file your return.

31 January: filing and payment deadline

The deadline to submit your online self-assessment return is 31 January following the end of the tax year. For the 2025 to 2026 tax year, that means the deadline is 31 January 2027. This is also the date by which you must pay any tax you owe. If you file by paper (which almost no one does anymore), the deadline is earlier: 31 October. Filing online gives you three extra months and calculates your tax automatically, so it is always the better choice.

Payments on account: the surprise that catches everyone

For many first-time self-assessment filers, payments on account come as a shock. This is HMRC's system for collecting tax in advance, based on the assumption that your income will be similar year to year. If your self-assessment tax bill (excluding Capital Gains Tax and student loan repayments) exceeds £1,000, and less than 80% of it was collected at source through PAYE, you must make two advance payments towards the following year's tax bill.

Each payment on account is equal to 50% of your previous year's tax bill. The first payment is due on 31 January, at the same time as your tax return and the previous year's final bill. The second payment is due on 31 July. Let's look at an example: imagine you are self-employed and file your first return for the 2025 to 2026 tax year. Your tax bill is £2,000, which you must pay by 31 January 2027. Because your bill exceeded £1,000, you also owe the first payment on account for 2026 to 2027 on the same day: £1,000. That means you owe £3,000 in total by 31 January 2027. Then on 31 July 2027, you owe the second payment on account of £1,000.

When you file your return for 2026 to 2027, if your actual bill is higher or lower than the £2,000 HMRC predicted, you either pay a balancing payment or receive a refund. This system spreads your tax payments across the year, but the first time you encounter it, the combined bill on 31 January can be up to 1.5 times your previous year's tax bill.

What if you cannot pay?

If you cannot afford to pay your tax bill on time, contact HMRC immediately. You may be able to set up a Time to Pay arrangement, which allows you to spread payments over several months. HMRC is generally willing to work with taxpayers who communicate early and honestly. Ignoring the bill, on the other hand, leads to penalties, interest charges, and enforcement action.

Penalties and interest

HMRC applies penalties and interest charges for late filing and late payment. An automatic £100 penalty is issued if you miss the 31 January filing deadline, even if you owe no tax. If your return is three months late, daily penalties of £10 per day start to accrue for up to 90 days. At six months late, you pay the higher of £300 or 5% of the tax due. At 12 months late, a further penalty of the same amount applies. Late payment of tax also triggers penalties. If tax remains unpaid 30 days after the deadline, a penalty of 5% of the outstanding amount is charged, with further 5% penalties at six months and 12 months.

Interest is charged separately on unpaid tax from the day after the payment deadline until it is paid in full. The interest rate changes periodically, so check the gov.uk website for the current rate. In some cases, HMRC may cancel or reduce penalties if you can demonstrate a reasonable excuse, such as serious illness, bereavement, or postal delays. Simply forgetting or not knowing about the deadline does not count as a reasonable excuse.

Practical steps to stay compliant

• Register as soon as you know you need to file, ideally well before the 5 October deadline.
• Keep clear records throughout the year: invoices, receipts, bank statements, and mileage logs if you are self-employed.
• File your return early if possible. You can file as soon as the tax year ends on 6 April. Early filing gives you time to arrange payment and reduces last-minute stress.
• Set money aside regularly for your tax bill and payments on account. Many self-employed people set aside 25 to 30% of their income in a separate account.
• Check whether you have a National Insurance number before registering. Foreign nationals working in the UK need a National Insurance number to register for self-assessment.
• Use HMRC's online tools or Citizens Advice if you are unsure whether you need to register.

Making Tax Digital: what is changing

From April 2026, a new system called Making Tax Digital for Income Tax (MTD ITSA) is being introduced for some self-employed people and landlords. If your combined self-employment or property income exceeds £50,000 per year, you will need to keep digital records and submit quarterly updates to HMRC using compatible software, in addition to a final annual declaration. Lower thresholds of £30,000 and £20,000 will apply from 2027 and 2028. If you are affected, payments on account will still apply, but the way you report income will change. Check the gov.uk Making Tax Digital pages or speak to an accountant if you think this may apply to you.

Final thoughts

Self-assessment can feel overwhelming at first, especially if you are used to a system where the government calculates your tax for you. The key is to register early, keep good records, understand the deadlines, and prepare for payments on account if your tax bill exceeds £1,000. Knowing the rules and planning ahead will help you avoid penalties, manage your cash flow, and stay on the right side of HMRC. If in doubt, Citizens Advice and HMRC's own helpline can guide you, and many accountants offer fixed-fee self-assessment services if you prefer professional help.