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Self Assessment Tax Returns – Do I Need To Complete One?Written on October 28, 2019 by Kirk Rice LLP

Self Assessment Tax Returns – Do I Need To Complete One?
Financial Services Questions

The Question:

I was talking to a friend recently and they think that I should complete a Self Assessment Tax return. I have not done so in the past and have not been asked to. I am a higher rate taxpayer but as an employee my income is taxed at source. I do have a small amount of interest from a savings account, dividend income from shares and I also regularly invest into a pension. This all seems straightforward but are they right, do I need to complete a Self Assessment Tax return?

Kirk Rice LLP answers:

It is an individual’s responsibility to ensure they pay the correct amount of Tax and make the required reports to HMRC; hence the title ‘Self Assessment’. Your income is taxed at source under the PAYE system and assuming your ‘notice of coding’ is correct, you should be paying the right amount of Tax on this income.

The way tax is paid for interest and dividends changed from 1 April 2016 and under the new rules, as a higher rate taxpayer, you can receive savings interest of up to £500 in the tax year without paying tax but for any excess above this savings allowance, you will need to pay tax at 40%. Similarly for dividends, there is no tax charge on the first £2,000 you receive, but tax will be payable on the excess at 32.5% for a higher rate taxpayer.  It is your responsibility to declare this tax due.

Could your business be eligible for R & D Tax relief?

The R&D Tax Relief Scheme is an HMRC incentive designed to encourage innovation and increased spending on Research and Development activities by companies operating in the UK.

There are several other reasons why you might need to submit a Self Assessment tax return, including if you have property rental income, you are a company director, you or your partner’s income is over £50,000 and you received child benefit, your taxable income was over £100,000 or you sold an asset such as shares or property and either the profit is more than the annual exemption of £12,000 or either the proceeds or cost is above the reporting limit of £48,000. It is your responsibility to tell HMRC that you need to submit a tax return and if you are not sure, please contact us to discuss your specific circumstances.

On a more positive note your pension contributions up to your maximum annual contribution qualify for tax relief at the highest rate of tax you pay, i.e. 40%. Basic rate relief (20%) is given at source; the additional 20% has to be claimed via your Self- Assessment Tax Return. You can also claim higher rate tax relief for any gift aid donations that you make.

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From a future tax planning perspective, ISA’s are tax free and it may be sensible to move as much of your savings and/or shares as possible into one. The ISA allowance for the 2019/20 tax year is £20,000.

If you believe that you may be required to file a Self Assessment Tax return and have done nothing about this, or would like us to take over the preparation of your tax return, then please email info@kirkrice.co.uk to arrange a call with one of our tax specialists.

Please note: Answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.