January can be a very trying month. For many reasons, not least of which is completing and filing your Self-Assessment Tax return. The pandemic has made the task even trickier this year.
Kay Brookes, partner at Bates Weston points out the most significant issues to look out for.
Firstly, profits.
Your profit position may have looked very different in the 2020/21 tax year. Profits may have been significantly reduced, but it is very important to realise that almost all grants paid out in relation to Covid 19 are regarded as taxable income and must be added to the profit of your business.
It is vital that you tell your advisor about all sources of income you may have received in the year. It is far better to get this right from the start, as HMRC hold records of grants awarded and inaccuracies, once cross referenced, are likely to generate enquiries. Penalties and interest will be charged from the first date the tax fell due.
If you have had income from self employment and been employed during the tax year, it is important to include all sources on your tax return.
Secondly, tax payments.
Payment of any tax due from the 202/21 tax year is required by 31 January 2022. In recognition of the difficulties Covid-19 has presented, HMRC has waived the late filing penalty as long as your return is filed by 28 February, however interest will still be charged on any outstanding tax due from the 1 February.
So, if at all possible, it is better to file and pay any tax due, and payments on account for the 2021/22 tax year by 31 January.
If you are struggling to pay the tax due, it is better to agree a time to pay arrangement with HMRC before 31 January, rather than after the deadline has passed.
Given that payments on account, are based on the previous year’s profit, if you feel that your position in the 2021/22 tax year is likely to be significantly different, it is important that you speak to your advisors about the possibility of reducing your payments on account. Remember that if you reduce your payments on account and end up underpaying your tax bill, you will have to pay interest on the outstanding amount. On the other hand, if you overpay you will receive a payment on account refund.
Self-Assessment tax is complicated. Speaking to HMRC, understanding the terminology and making sure you are complying with the current regulations can be a time consuming and difficult process. Getting it wrong can be costly. Accountants and tax advisors, like Bates Weston, use their expertise to make sure their clients tax bill is as low as it can be, claiming all relevant allowances. As well as tax savings, a good advisor will make tax far less stressful for their clients. Their return is in safe hands.
That is certainly the case for the Bates Weston team. If January has been a trying month for you this year, and you would like help with your taxes next year, get in touch with us. We are happy to help.