Change to Self Assessment Threshold: Are you affected?
The world of tax is always evolving, and we understand how crucial it is for our clients to stay informed. Recent changes by HMRC regarding the Self-Assessment threshold could affect many taxpayers, and we’re here to break it down for you.
Increased Threshold for Self-Assessment from 2023-24
Starting from 6 April 2023, HMRC has announced a notable increase in the threshold for Self-Assessment for taxpayers who are taxed solely through PAYE. The previous limit was set at £100,000, but this has now risen to £150,000.
While on paper this does mean fewer individuals will need to submit Self Assessment returns, HMRC thresholds (including tax bands) drift upwards annually to match wage inflation.
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Impact on 2022-23 Tax Returns
It’s important to note that if you’re submitting a Self-Assessment tax return for the 2022–23 period, the earlier threshold of £100,000 still applies. However, contractors and professionals working in the technology sector with reported income between £100,000 and £150,000 who do not meet other Self-Assessment criteria may receive an “exit letter” from HMRC.
For consultants and specialist service providers, receiving this letter means you may no longer be required to file an annual Self-Assessment tax return, provided all HMRC requirements are satisfied.
Criteria for 2023-24 and Beyond
Despite the increased threshold for those taxed under PAYE, certain conditions will still necessitate a Self-Assessment tax return. You will have to file one if:
- You have received any untaxed income.
- You’re a partner in a business partnership.
- You’re liable to the High Income Child Benefit Charge.
- You’re a self-employed individual with a gross income surpassing £1,000.
Act Promptly!
If this is your first time completing a Self-Assessment return, it’s essential to notify HMRC swiftly. The deadline to inform them is by 5 October following the tax year’s conclusion. And if the 2022-23 tax year applies to you, remember to electronically file your tax return and settle any tax obligations by 31 January 2024.
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