Are you ready for your January tax deadline?
A quick guide preparing you for the 31st of January tax assessment deadline
Tax deadline. It’s a term that strikes self-assessment fear into many hearts over the new year festivities, but with some basic preparation and organisation it doesn’t have to be as painful as you think.
The deadline for the tax year (6th April 2019 – 5th April 2020) as well as the online self-assessment falls on the 31st January 2020. Miss the deadline and you’ll likely have to pay a penalty, unless you have an excellent excuse, so it’s worth preparing for. Here’s what you need to know.
Do I need to file a self-assessment tax return?
You’ll need to file a self-assessment return if you’re:
- A sole trader
- A partner in a business partnership
- A minister of a religion
- An executor or trustee of an estate
- Earn more than £50,000 PAYE and receive child benefit
- Earn untaxed income over a set amount, which could be anything from renting a property to interest from savings, dividends and investments or a foreign income
If you’re unsure if any of this applies to you, HMRC has created a tool to help you know if you need to complete a tax return.
One thing to note is that if you’re filing your VAT returns digitally, these need to be done quarterly, in line with last year's introduction of Making Tax Digital.
And don’t worry – last year more than 11 million Brits filed a self-assessment tax return, so you’re not alone!
If your Business has been affected by COVID-19, there's a possibility that you can claim a grant through the Self-Employment Income Support Scheme.
How do I get started filing my tax return?
First up, you’ll need to have registered with HMRC for self-assessment, at which point they’ll have sent you a Unique Taxpayer Reference (or UTR). That can take up to 20 working days.
Armed with your UTR you should’ve signed up online (the deadline for this was 5th October 2020) to file your tax return. If you missed the registration deadline there’s a chance you may be issued a penalty fine. However, if you contact HMRC and have a reasonable excuse, you may be able to have these penalties withdrawn. Once signed up, HMRC will have sent you an activation code within seven working days.
You’re now fully registered and ready to file, as long as you have all the information you’ll need.
If you’re looking for some help, there are some specialist online tax return services for self-assessment who charge less than £50/year. If you're wanting to learn more, we have also written a guide on Record-Keeping and Expenses for sole traders.
What do I need to file a tax return?
This is where the preparation and organisation we mentioned earlier comes in handy. The best way to approach collecting the information for your tax return is to get into a habit of collecting and collating it as you go, otherwise you can end up with a mountain of paperwork to get through at the end of the year. This essentially means:
- Keep an exact record of your income and everything you earn along with dates you invoice and get paid
- Keep an organised record (and receipts!) of everything you spend that’s related to your business – commonly known as allowable expenses – as you can deduct these costs from your income to work out your profit. You only need to pay tax on your profits
HMRC allows expenses for things like:
- Office costs including rental, upkeep and bills for work premises, phone and internet bills, stationery, printing and postage
- The cost of things you buy to sell, such as stock for a shop or raw materials for manufacturing
- Travel costs like transport fares, fuel and parking fees as well as hotel rooms and meals on overnight trips
- If you work from home you can also claim for the proportion of your home that you work in, taking into account the amount of time you’re there, as well as the associated costs like household bills
- Legal and financial costs like lawyers and accountants
- Business insurance
- Subscriptions to business specific organisations and trade bodies
- Marketing your business online and across different media, including providing free samples
- Specialist clothing that you need specifically to carry out your work, like a special uniform or costume
Quick tip: To make things easier for Cashplus business customers, the Cashplus Mobile App contains two features that can be very useful to business owners. Spending Insights is a fast and simple way to track and tag your payments with the help of Google Maps data. You can create a tag and assign any transaction to a certain project and attach receipts and notes to individual transactions.
Download the Cashplus Mobile App on your phone today.
If you’re a Cashplus business customer and require a statement, these are available to be downloaded or printed for up to 18 months within Online Servicing. Simply log in and head to ‘Statements’ in Online Servicing. For any statements past this date, please Contact Us.
If you're not yet a Cashplus Customer, you can apply for a Business Account with us by completing our online application form, which takes less than 5 minutes.
How do I file and pay my tax return?
To file, just log in to your HMRC account and follow the instructions. Once your tax bill is calculated, it will include details of where to make your payment. Remember – the deadline is 31st January annually so don’t leave it too late or you’ll face a fine.
It’s important to be prepared and save money from your income throughout the year so you have the funds to pay your bill. This is particularly important the first time you file your tax return as you’ll have to pay tax not only on last year’s profits but also half that amount again in advance of next year’s profit (it’s referred to as ‘payment on account’). Then you’ll have to make a second payment on account on 31 July that same year, so being prepared is key.
It may sound galling, but it’s actually designed to make sure you’ve paid most or all of your next year’s tax well before the 31 January deadline, meaning you’ll have a much smaller ‘balancing payment’ to make as well as the payment on account for the next year, of course.
Do I need an accountant?
There’s no right or wrong answer to this – and it depends on your approach and attitude to filing your taxes online yourself.
You could, for example, use an accountant for your first year or two trading and lean on their expertise to learn how to do it yourself. Then again, once you have one it can be hard to turn them away for the cost involved – which should be around £150-200 plus VAT in fees for a self-assessment return. And remember, accountants’ bills are tax deductible.
If you’re a limited company, there is a chance you could pay significantly more with fees likely to run to around £1,000 plus VAT for year-round support. However, there are some specialist contractor and SME accountants that can provide services for limited companies for £30-50 per month.
But if your returns are complex or you’re worried you’re not doing it right, an accountant is an excellent resource to lean on when you need them. And they can often more than make up for their fees by knowing how to maximise your setup, allowable expenses and any relief available while freeing up precious time for you to earn more income!
What about one of these accounting apps?
There’s been a massive influx of accounting apps and software over the last few years promising to solve all your tax questions and headaches.
Indeed, the government’s Making Tax Digital policy now requires VAT registered SMEs and sole traders earning above a certain threshold to use such software and keep digital records to submit their VAT returns.
If you’re self-employed, you can also use these tools to keep digital business records and send income tax updates to HMRC instead of filing a self-assessment tax return. It’s voluntary at the moment but that may change in the next few years if it’s successful.
Anything else I need to know?
We’ve said it before and we’ll say it again – the most important thing is to be prepared, keep accurate records as you go and make sure you put enough aside from your income to pay your tax come deadline day. And if you’re unsure about anything – don’t be afraid to ask a professional! Tax, simple eh?
This content was created on 15th January 2020
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