“Many individuals who are not self-employed are unaware they have self-assessment obligations [namely to file a tax return and pay whatever tax is due],” said Susan Reilly, a senior manager with Deloitte’s private clients division.
It is not only the self-employed who must file a return. Anyone receiving income that cannot be taxed in the normal way must usually do so too — and pay whatever tax is due. That income could include rent earned from an investment property, money earned from Airbnb or nixers, share dividends, foreign income and foreign pensions, and any profits you make from exercising share options.
“Some of those caught in the self-assessment tax net include individuals who have opened a foreign bank account, individuals who acquired a foreign life policy, a material interest in an offshore product or fund, or someone who has sold an asset liable for Capital Gains Tax (CGT),” said Reilly.
Even if you are earning income that is exempt from tax, you may still need to file a tax return and declare that tax-exempt income on your return. This, for example, is the case with the rent-a-room relief scheme, where up to €14,000 a year can be earned tax-free by renting out a room in your home.
“Individuals who have income to which the rent-a-room relief-exemption applies and whose only other income is employment taxed under PAYE, or who have no other source of income, must file an income tax return,” said a spokeswoman for the Revenue Commissioners.
Of course, should you be self-employed and earning tax-free income under the rent-a-room scheme, you must also declare that exempt income in your tax return.
Some proprietary directors of companies may be unaware of their obligation to file a return. A proprietary director is the beneficial owner of — or an individual who controls — more than 15pc of the ordinary share capital of a company. “Proprietary directors are obliged to file tax returns — even if they have no income other than their PAYE income,” said Suzanne O’neill, private client partner with RSM.
“Directors are heavily penalised for failure to file a tax return — with a surcharge applied to their tax liability before the PAYE already paid is deducted.”