High Earners in the UK May Need To File A Tax Return
HMRC are looking at your 2021/22 income ...
Posted by Helen Beaumont on 18/09/2024 @ 8:00AM
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 process ...
If HMRC does not receive a response, it may reactivate a high earner's self-assessment account!
To turn a phrase, "with great wealth comes great responsibility", so for high earners in the UK, this couldn't be more true when it comes to tax obligations. While most people are familiar with the concept of filing tax returns, the process can be more complicated for those who earn a high income.
"First and foremost, it's important to understand that the UK has a progressive tax system!"
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 £150,000.
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 apply 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.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you're a high earner who needs to discover if you need to file a tax return for the 2021/22 tax year, do give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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