As an umbrella company employee, the Pay As Your Earn (PAYE) system automatically deducts tax from your wages. However, there are instances where you will be required to submit a tax return to HMRC. Continue reading to discover when contractors using an umbrella company need to submit a self-assessment tax return.

What is a self-assessment tax return?

Self-assessment is the system HMRC uses to collect income tax from individuals who have earned income that HMRC doesn’t yet know about. For example, if you receive income from renting out a property, profiting from a business, or receiving income from investments or savings, the tax return is used to report your earnings and provide information such as the source of the earnings over the year.

Do contractors using an umbrella company need to submit a self-assessment tax return?

When you become an employee of an umbrella company, your income is processed via Pay As You Earn (PAYE) – the HMRC’s system for collecting tax and National Insurance from your wages. If your only income is paid via PAYE and is below the £150,000 threshold (before tax), you will not likely need to submit a tax return. However, there are instances where you will be required to submit a tax return to HMRC if you are a contractor using an umbrella company.

You may be required to submit a self-assessment tax return to HMRC for the tax year the 6th of April 2023 to the 5th of April 2024 if any of the following apply:

  • If you had a taxable income of £150,000 or more, which is paid through PAYE
  • You were self-employed as a sole trader and earned more than £1,000 (before taking off anything you can claim tax relief on)
  • You had to pay the High Income Child Benefit Charge
  • You are a higher rate or additional rate taxpayer and make contributions to a pension scheme
  • You had to pay Capital Gains Tax when you sold or disposed of something that increased in value
  • You receive money from renting out a property
  • You receive money from investments, savings or dividends
  • You receive any form of untaxed income specified by HMRC

Please visit the government’s website if you are unsure whether you need to submit a tax return.

How to complete a tax return

If you are a contractor using an umbrella company and you need to submit a self-assessment tax return, you must register for self-assessment by the 5th of October if you have not sent one before. Once registered, you’ll be sent a Unique Taxpayer Reference (UTR) by post within 15 days. Please note it can take longer if you live overseas. Your UTR is a 10-digit number, sometimes referred to as a tax reference.

If you want to submit your tax return online, you must set up a Government Gateway account. When you receive your UTR in the post, the letter will also contain instructions on how to set up your account. Follow these instructions to set up your account. Once you’ve set up your Government Gateway account, you’ll be sent an activation code in the post. You’ll need this code to complete your Government Gateway account setup.

When you are ready to file your self-assessment, you need to have the following documents in front of you:

  • Your UTR
  • Your National Insurance number
  • Records of any expenses relating to self-employment
  • P60 or other records showing how much income you received that you’ve already paid tax on
  • Details of your untaxed income from the tax year, including income from self-employment, dividends and interest
  • Any contributions to charity or pensions that might be eligible for tax relief

There are two sections to the tax return; you only need to fill out the sections and forms that apply to you. The main section is the SA100, which deals with:

  • Taxed and untaxed income in the form of interest and dividends
  • Pension contributions
  • Charitable donations
  • Benefits including, Child Benefit, State Pension, and Blind Person’s Allowance

You may need to complete supplementary pages if you have income from abroad, income as a foreign national (or dual resident), income to declare from self-employment, as a company director, or have to declare Capital Gains.

You only need to complete an SA200 tax return if HMRC sends it to you.

Don’t worry—you do not need to complete your return in one go. You can complete a bit, save it, and come back to it at a later date—as long as you submit it by the deadline.

What is the deadline for filing a tax return?

The deadline for submitting a paper tax return form is the 31st of October or the 31st of January if you’re a trustee of a registered pension scheme or a non-resident company. If you would like to submit a tax return online, the deadline is the 31st of January.

If you pay your tax bill late or your return is filed up to three months late, you will be fined £100. If it is later, your fine will be increased. HMRC can also charge interest on late payments.

Paying your tax bill

The deadlines for paying your self-assessment tax bill are:

  • The 31st of January – Your first payment on account. You may also need to make a balancing payment for any tax you owe for the previous tax year.
  • The 31st of July – Your second payment on account.

For more information about payments on account, please visit the government’s website.

Our in-house self-assessment tax team can help

Filing a tax return for the first time can be daunting and confusing, but you must file it correctly and on time. If you want to avoid the stress of completing a tax return, Churchill Knight Umbrella has an in-house dedicated self-assessment tax team that can help. When you appoint Churchill Knight Umbrella to complete your tax return, you’ll benefit from the following:

  • Time-saving – Completing a tax return can be time-consuming, particularly if you have never completed one before or you have a complex financial situation. Churchill Knight Umbrella will handle the entire process on your behalf, leaving you more time to focus on other things.
  • Tax expertise—Our expert team will advise you of your tax liability or whether you are due a refund and provide guidance on tax allowances, reliefs, and laws to help you legally reduce your tax liability.
  • Support – You’ll receive support and guidance from our friendly team throughout the entire process.
  • Accuracy – Your tax return will be completed and filed with HMRC compliantly, accurately, and on time.

To find out more about our self-assessment tax return service or to appoint Churchill Knight Umbrella to complete your tax return, please call 01707 871622. You can also schedule a call, and a member of the team will contact you to discuss the service.