With everything else going on, you’d be forgiven for missing that April 6th was the start of the new financial year. If you’re isolating at home, working or not, you might even have lost track of what day it is, never mind which one was the end of the 2019-2020 tax year!And if you normally leave your self-assessment tax return to the last minute, you’re not alone. According to HMRC, more than 700,000 people submitted their return on deadline day in January this year. Nearly a million went on to miss the deadline altogether.
But, now more than ever, it’s important to get your “ducks in a row” when it comes to your finances. We understand that your self-assessment tax return might seem like the least of your worries, but there are some real benefits to getting it done as early as possible.
The benefits of doing your self-assessment now
If you’ve had a rough year, especially in the last few weeks, and have already paid tax on account based on last year’s figures, then you may even be due a tax refund. This could be an immediate boost to your short-term finances.
Cashflow is key to small businesses even under normal circumstances. A quick tax return, leading to a refund, would help you immediately, and could tide you over whilst you’re waiting for an 80% grant from the UK government (if you qualify).
TIP: If you’re unsure what support you qualify for, check out our Business Support Hub.
Even if you aren’t expecting a refund, knowing your tax bill ahead of time will allow you to make sure adequate savings are in place for January 31st, 2021. This is when you’ll have to pay the whole bill, as the July 31st payment on account has been cancelled for 2020.
It’s important to note that while the UK Government are allowing self-employed taxpayers to defer their July 2020 payment to January 2021, they haven’t cancelled it altogether.
COVID19 Update – Payment for the 19-20 tax return can now be delayed until 31st January 2022, but be aware you still may be required to make a payment on account in July 2021.
Planning for tax – more important than ever
There’s no doubt that many of us are struggling with extra stress and pressure. Being able to plan for your tax bill 9 months in advance can certainly ease some of this.
The last thing you want is to get through to the end of the year, and then be worried about finding your tax bill money. It really is important to plan for it.
It’s also worth noting that if you’ve had an amazing year, your 2019-2020 figures won’t count towards your 80% self-employment grant.
And if you’ve stopped being self-employed in the 2019-2020 tax year, you won’t qualify either, as you must demonstrate that you’re continuing your self-employment in 2020-2021.
TIP: If you were considering making the transition to trading as a limited company, instead of continuing self-employment, it may be worth postponing that decision for now.
This means you can continue as a self-employed trader and make use of support on offer from the government.
If you’ve already registered as a limited company, you can leave it dormant until conditions improve, and the economy begins to recover.
Do I need to complete a tax return?
If you have income other than from employment or a pension, for example – investments that pay dividends, interest income of more than £1,000, or rental income – you will be required to submit a self-assessment tax return.
To do this, you’ll need to register with the HMRC for a UTR (Unique Taxpayer Reference).