When you think of the word taxes, many business owners want to pull their hair out. But preparing to get your tax return completed doesn’t need to be daunting. Whether you are an incorporated entrepreneur or self-employed, either way, you will have to pay taxes on your business earnings, so you might as well put your best foot forward.
The key to a successful tax season is efficiency. The less time you spend preparing for your taxes, the more time you spend working in your business.
As tax season approaches, Young Entrepreneur of England member and Ellis Bennett from EA Accounting, has put together a list of tips to help prepare you for tax season.
So, what is Self-Assessment?
Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax. Tax is usually deducted automatically from wages, pensions and savings. People and businesses with other income (including COVID-19 grants and support payments) must report it in a tax return.
What information will I need to fill in a Self-Assessment tax return?
If you’ve never filled in a self-assessment tax return before, it can look daunting. But when you understand the process, it’s relatively simple – as long as you have all the information you need.
Before you start, make sure you have:
• Your ten-digit Unique Taxpayer Reference (UTR)
• Your National Insurance number
• Details of your untaxed income from the tax year, including income from self-employment, dividends and interest on shares
• Records of any expenses relating to self-employment
• Any contributions to charity or pensions that might be eligible for tax relief
• P60 or other records showing how much income you received that you’ve already paid tax on.
It’s also a good idea to read the relevant HMRC help sheets. Particularly on the extra sections, or supplementary pages, that relate to why you’re filling in the Self-Assessment tax return.
Below are a few tips from EA Accounting:
1. You need to register with HMRC for a UTR number (unique taxpayers’ reference) if you haven’t got one already. This allows you to submit a personal tax return.
2. You will need to get together all your income and expenses for the tax year from the 6th of April 2020 until the 5th of April 2021.
3. If you have been employed during this period and left your job you will need your P45. If you were employed for the whole tax year, then you will need your P60.
4. You will need to create a personal tax account and register for self-assessment, alternatively appoint an accountant to save this stress!
5. Most importantly the deadline to submit is the 31st of January 2022, HMRC have said that they will not issue penalties for those that submit before the 28th of February.
6. The payment of any tax is also due by the 31st of January 2022, again HMRC have said that they will not issue any penalties before the 1st of April 2022, however will start charging interest on late payments from the 1st Feb 2022
Submitting your tax return doesn’t need to be daunting, chat with EA Accounting to see how they can help make the process smooth sailing!