If you are self-employed, you might be starting to think about your annual self assessment tax return. It is one of those jobs that we put off to ‘the following week’ and before you know it you are in a last minute rush to complete on time. We have all been there!! There are so many benefits to getting prepared and maybe even submitting your tax return early (and so many stresses when you don’t!).
So when exactly are tax returns due for the self-employed? If you file your submissions online then your returns and the money due must be with HMRC by midnight on the 31st January. Being just one day late will mean that you will have to pay a penalty of £100 and who needs that in January!!!! Remember, if you file using a paper return then your submission is due months earlier (31st October).
If you are anything like me, the highs and lows of Christmas can stretch way into January, New Year resolutions take over your life (for a few weeks at least!) and before you know it it’s the end of the month and so it begins.
So, why start now?
- Firstly, if you have not already done so, you will need to register with HMRC for self assessment. This is usually done before the 5th October and at the same time you will need to register for the online service too. When you register you will be issued with a 10 digit Unique Taxpayer Reference (UTR) and an activation code for your online account. These can take up to 10 days to come through the post so don’t leave this until the last minute.
- Cashflow is another major reason to get submitting sooner rather than later! Remember, payment of your tax return is due by midnight on the 31st January and as we all know, money is not always free flowing in January!!! Completing your assessment now means that you will know exactly how much you have to pay by the deadline so can help you manage your budget and finances before the cash has to leave your account!
- The other payment to be aware of is the ‘payment on account’. This is an advance payment towards your next years bill and is calculated as half of your current years bill. These are paid twice throughout the year, first being on the 31st January at the same time as your current bill and a second at the end of July. There are a few reasons why this might not apply or the calculation maybe different but on the whole, assume the half and half rule. Knowing what you have to pay next year can help with any business forecast and plans. If you are unsure about your calculation of this payment or if it applies to you, seek advice from an accountant or other finance professional.
- In order to complete your return you are going to need a whole host of information!!! By acting now you will give yourself time to collect all your paperwork or dig it out from the back of the pile so you know well in advance that you have everything you need. It will also allow you time to request copies of any misplaced documents or gather any additional information and/or figures that you might need. If you don’t already keep your bookkeeping up to date or at all, this will allow you time to get your affairs in order and records up to date.
- Allow yourself time to find an accountant! Although it is not a must for the small business, it can be a good idea to invest in finding a good accountant to make sure everything is present and correct. Accountants are notoriously busy towards the end of the year and especially in January and you may struggle to get in with your preferred accountant or find someone that can take on your work. A few enquires now may just save you the worry later on knowing that you have secured someone to look over your books.
Now it is time to sit back, relax and get festive (ok maybe not quite yet!). But by getting prepared and knowing what and when things are required of you will mean that you can really enjoy the build up of Christmas and time with your family without the dreaded tax man hanging over your head. Plus you get to tick that job off of your ‘To Do’ list ….. and who doesn’t love a good list!!
