Getting clients back into self-assessment
Following the end of the 2024/25 tax return filing season, some taxpayers will be receiving ‘exit letters’ (also known as SA251 letters) from HMRC telling them that they no longer need to file Self-Assessment returns. For most taxpayers this will appear to be welcome news, but it is worth stopping for a moment to consider whether there might be benefits to remaining in Self-Assessment.
Where a taxpayer or their agent feels that remaining in Self-Assessment would be the best route, it's important to contact HMRC to re-register, rather than simply continuing to file returns.
There are many valid reasons why someone may no longer need to file an annual tax return.
An individual who has stopped trading, or letting property in 2024/25, may no longer have any untaxed income to report in 2025/26. An individual with employment income who is liable to the High Income Child Benefit Charge (HICBC) may choose to opt out of Self-Assessment to pay via the new online service launched last year. However, HMRC will also remove individuals with investment income (savings and/or dividends) of under £10,000 despite the fact they will still have tax to pay. Outside Self-Assessment, HMRC will collect this tax in other ways such as Simple Assessment.
But where an individual has income tax to pay, there are merits to pulling together all sources of income – and any reliefs – for the year in one go via the Self-Assessment route. This provides a ‘once and done’ approach with the correct information upfront and accurate tax computations - and the ability to appoint an agent for support.
Where HMRC chooses to collect tax via Simple Assessment or through PAYE coding notices and annual reconciliations, these are issued at the time of HMRC's choosing, do not always contain accurate information (meaning the taxpayer has to ring or write with their corrections) and it is much more difficult to appoint an agent to help.
Keeping clients within self-assessment
One of the ATT's Top Ten asks is for a digital service to allow people to get back into Self-Assessment easily where this is the most efficient way to handle their affairs.
In the meantime, members are reminded that they can use the dedicated re-entry service via the Agent Dedicated Line (ADL). The more agents who do this (rather than just submitting an unsolicited return), the more evidence it gives of the need for a digital service to allow agents to opt clients back in to Self-Assessment.
There is no obligation to use the ADL service, as it is also possible to re-activate a client's Self- Assessment account by completing an online SA1 (or Form CWF1 for the self-employed). However, the new service should enable agents to re-activate the Self-Assessment account more quickly than other methods.
Avoid voluntary returns
When a client is removed from Self-Assessment, it is tempting to continue to file using their existing UTR. This is sometimes called an ‘unsolicited’ or 'voluntary' return - essentially a return which HMRC is not expecting. But re-registering is an important step. Unless HMRC knows to expect a return, their systems can send out Simple Assessments or P800s which will need to be cancelled.
It’s essential to re-register any client who is expecting a repayment from HMRC, as voluntary returns with repayments fall out of HMRC’s automatic processing system, meaning that the repayment will be delayed. HMRC will need to be contacted to get the return processed and to release the repayment.
If members have any issues re-registering clients who have been removed from Self-Assessment but would like to stay within it, please let us know.