After the hectic Christmas period, tax returns may not be the first thing entrepreneurs think about as work begins in January, but leaving this vital task to the last minute could lead to a £100 fine.
As the deadline for paper returns has already passed for the 2013/14 tax year, anyone who is self-employed as a sole trader or within a partnership, or acting as a company director for a for-profit business, must now complete a tax return online before the 31st January. While this may still seem like ample time, there are a number of possible delays that may surface when filling in the form, meaning it’s important to get started as soon as possible.
Primarily, individuals must ensure they have a valid account and password set up on the HM Revenue and Customs website, as it can take several weeks to issue a new one.
The next step is to collect together all the paperwork needed to fill in the form. This includes proof of all forms of income, including salaried earnings, taxable benefits, pension payments, property income, capital gains and revenues through self-employment. It also includes details of company expenses, as these can often be offset against taxable earnings. Be aware that if any documentation has been lost or misplaced, it may take some time to have replacements sent through from an employer or bank.
Once all relevant information has been located, individuals should log in to their HMRC account and select the appropriate form based on the legal status of their business. The online system can operate more slowly as the deadline approaches, due to a heavy volume of traffic, so starting early is strongly advised. Thankfully, in-depth help sheets explaining how to fill in each section of the form are also available via gov.uk, which can be particularly useful for those completing their first assessment.
For those still finding the system difficult to understand, it is also possible to use third party accounting software in order to file a return, provided the program appears on HMRC’s approved list. Alternatively, business owners can enlist an accountant or tax adviser to assist with their return, but will still be responsible for ensuring all information is correct.
Once the assessment has been completed, the total tax owed will automatically be calculated and displayed, and individuals must pay the first instalment of this bill by the 31st January, with a second instalment due before the 31st of July. Typically, this will also include a ‘payment on account’ towards the next year’s tax bill, calculated based on this year’s total. Payment can be made via a number of methods, though some options may take several days for the money to be transferred, and it is important to account for this time before the deadline.
Following completion, ordinarily it is still possible to make corrections to the return within 12 months, though beyond this HMRC must be contacted directly.
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