If, as an individual, you need to complete a tax return it will be a Self Assessment return. These cover a period of 12 months up to 5th April and any tax due must be paid by 31st January the following year.
Many people think a tax return is simple to complete, sure anybody can put a few numbers in a few boxes, right?!
Well yes that is true, provided you:
- know which numbers to put in which boxes
- ensure that all the expenses you have claimed are allowable for tax purposes – believe it or not just because you paid for it out of your business bank account does not necessarily mean it is an allowable business expense.
- separate out all your capital and revenue spend and put them in the appropriate boxes
- claim appropriate capital allowances, ensuring that your spend meets all the rules (yes there are actual rules which are sometimes quite different to what we Jonny from the online chat forum says)
- ensure that all your income is included including pensions, some benefits etc.
- claim allowances for all the things you are allowed e.g., charitable donations, certain types of pension payments, age related allowances, and many more that you probably have not even heard of.
and that is all before you try to remember your government gateway login and password since you have not used it since last year, to be able to submit it in time!
There are penalties for late submissions and deliberate errors. You could also end up subject to an HMRC investigation which can be a very time consuming and costly process.
Making Tax Digital for Income Tax
Making Tax digital for Income Tax comes into effect for accounting periods starting on or after 6 April 2023, for those businesses whose taxable turnover or income from property is great than £10,000.
It will mean that all sole traders and business owners must store information electronically, in approved software, and submit a summary profit report to HMRC every 3 months. A final declaration must then be submitted at the end of each year to confirm that the quarterly information you sent was correct and make any adjustments for claims of allowances etc. You will be able to calculate the amount of tax due through your software.
To prepare our clients for this we are insisting that all new clients move onto our partner software, which is HMRC approved, and we are migrating all existing clients on a staged basis to ensure that everyone has a smooth transition and has established good habits by April 2023.
If you need help with your tax returns please get in touch to see if we can assist you.