HMRC is writing to high earners querying whether they need to submit a tax return for the 2021/22 year and offering them guidance on how to navigate this complex process ...
This means that the more they earn, the higher their tax rate will be. High earners are likely to fall into the top tax bracket, which currently stands at 45% for individuals earning over £100,000.
One of the main reasons why high earners may need to submit tax returns is to report additional sources of income. A high earner may have investments, rental properties, or other sources of income in addition to their core salary.
These sources of income may not be subject to automatic tax deductions, and therefore, will need to be reported on a tax return. Failure to do so can result in penalties and fines from HMRC.
Additionally, high earners may also need to submit tax returns if they have a complex tax situation. This could include having multiple sources of income, owning a business, or receiving income from abroad. In these cases, it may be necessary to seek the assistance of a professional tax adviser to ensure that all tax obligations are met.
An individual may need to complete a tax return for 2021/22 if any of the following applied for that year:
- they earned more than £100,000 (even if PAYE was applied) - they received income from property above the rent-a-room limit of £7,500, or £3,750 if the property was owned jointly - they received income from self-employment and exceeded the £1,000 trading allowance - they disposed of shares, property, or other assets - they had dividends or savings interest (but not including ISAs) - they claimed tax relief on gift aid donations or pension contributions - the High Income Child Benefit Charge applied to recover part or all of the child benefit received. For 2021/22, the HICBC applied to the higher earner in the household where that person's income exceeded £50,000 - they made student loan repayments other than repayments dealt with via PAYE
The self-assessment income threshold was increased from £100,000 to £150,000 for 2023/24 and removed altogether for 2024/25 onwards.
It is noted that HMRC may carry out a compliance check in the future in which case a penalty may be charged if errors are found. The amount of the penalty could be reduced if the person tells HMRC about any mistakes before the check is carried out.
If HMRC does not receive a response to their letter, it may reactivate the person's self-assessment account and insist on a return being filed.
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