UTR Number – What it is? Why It’s Important?

Do you remember the old school days when your teacher used to call you by your roll number? In your class, that roll number was obviously your unique identifier. Of course, if you have been a topper, things were different. Think of UTR as your unique identifier in the UK tax system. It is a 10-digit number issued by HM Revenue and Customs (HMRC) that was started to identify each taxpayer uniquely. So, it can also be termed as a tax reference.  

Types of UTR Numbers

There are basically two types of UTR numbers-

• Individual UTR: This is issued to individuals for personal tax matters.
• Company UTR: This is issued to businesses and is linked to the tax records of a company

If you are a self-employed professional and a business owner, HMRC assigns two distinct UTR numbers. In fact, a UTR number will be assigned to you automatically as soon as you register for self-assessment online or set up a limited company. Actually, it is best to register for a UTR number within the first three months of starting your business as the process is lengthy. Your UTR number will be in a letter along with an activation code, which will be sent by the HMRC to your registered office address, and this may take a few weeks!

Importance of UTR Number

Your UTR number is used for various purposes. Here are a few important ones-

Filing Your Tax Returns: 

It is a must-have to file a Self-Assessment as it identifies your tax return and ensures that it is linked to your tax records.

Making Payments: 

When you make any payments to the HMRC, it acts as proof that the payment has been initiated or completed. This also aids in avoiding any confusion, dispute or delays in payment processing.

HMRC Correspondence: 

Whether you want to enquire about your tax status, deal with a tax refund, or respond to an HMRC inquiry, it ensures that all the correspondence is linked to your account.

Avoiding Penalties: 

Sometimes, even after putting in the best efforts, you may miss the tax deadlines. As a result, you are supposed to face the penalties. However, if you have your UTR number handy, the risk of administrative errors leading to hefty fines is minimized. 

Regulatory and Compliance Requirements:

Some regulatory bodies demand detailed transaction records for maintaining compliance. At that time, your UTR number ensures transparency and adherence to financial regulations.

Where Can You Find Your UTR Number?

If you have been given a UTR number but cannot remember it, don’t worry. You can find it in your previous self-assessment tax returns or bank statements. Check your payment reminders or just any correspondence from HMRC. Also, please check your personal tax account on the HMRC app or website. Remember, if you lose your UTR number, it can have dangerous consequences due to identity theft. In such a case, it is advisable to immediately contact HMRC by phone.

Your UTR number is critical for maintaining your tax identity. So, it is important to keep it safe and handy during tax filing and any other dealings with HMRC. If you are uncertain whether a UTR number is required for your situation, please seek advice from a tax advisor.