“It’s always good practice, though, to get ahead of yourself throughout the year. If you’re worried about making your tax payments then for this year HMRC do have a facility which lets you set up your own payment plan to help spread the cost of tax liabilities – up to the value of £30,000 – by setting up monthly direct debits online, using the Time to Pay facility.”
1) Charity payments can reduce your tax and personal pensions. If you make payments to charity or into a personal pension, then make sure you claim the appropriate tax relief. This is often forgotten.
2) Ensure that you’ve claimed all deductions which are available to you – working from home allowances, professional fees, subscription costs, IT costs and all costs associated with running your business that are “wholly and exclusively” (which simply put means ‘only for’) for the business.
3) If you’re married and one of you doesn’t use all of your personal allowance (which is £12,500 this year), consider transferring your personal allowance to save a few pennies.
4) Watch out for scams at this time of year! Make sure any correspondence from HMRC is ACTUALLY from HMRC. Watch out for pesky scams at this time of year, which can cost you thousands of pounds.
5) If you received a Self Employment Income Support Scheme (SEISS) grant then, yes, this is taxable – but don’t worry about trying to calculate how much related to March income. This doesn’t need to be included on your 2019/20 Tax Return. Include all of it when filling in your form in your next tax return (2020/21). It is possible that the fourth SEISS grant will be taxable in the 2021/22 tax year – but this has yet to be decided.
6) If you can’t afford to pay this time, then you can arrange a Time to Pay direct debit scheme online. Interest on this will be charged at 2.6% per annum from 1 February. There is a section titled ‘pay what you owe in instalments’ on the HMRC website with step-by-step instructions.
7) Remember that if you miss the deadline and don’t have a valid reason, then you will face a £100 fine. HMRC have said that they will accept coronavirus-related personal or business disruption as a “reasonable excuse” for being unable to file on time and will cancel penalties as long as you file as soon as possible. It will, though, look at each case individually, so best to act fast.
8) Get your house in order! To avoid being one of those over the Christmas period submitting your forms, set up a file on your computer or simply purchase an old-fashioned wallet or level arch to keep all of your documents in – and ensure that you do it in plenty of time. Have a spreadsheet where you keep everything to hand – your accountant will love you for this and there’s usually a discount for good, quality data. Also remember that there is a statutory duty to keep the records which support your tax return as you may be required to provide them to HMRC.
9) Capital Gains – have you sold anything between 6 April 2019 – 5 April 2020? These should be reported on your tax return too. Also, remember the new rules if you have a second property and are looking to sell this, you have to report the gain within 30 days.
10) Finally, tax planning…if you are set up as a sole trader and you’re taxed at 40%, consider whether setting up a limited company may be more beneficial for tax purposes. Or look at opportunities to invest in pensions or charitable donations. If you’ve got a side hustle and you’ve made a loss on this, there may be more efficient ways to use this loss than just carrying it forwards against future profits.