The following is a sample extract of an unedited draft chapter of our forthcoming book, Tax Return Made Simple which addresses each of the 12 challenges that stop most business owners from doing their tax return and their accounts.
Challenge 7: Fearing or not understanding how the tax works other than it’s out to fleece me!
Solution: Understand the tax return basics
If you don’t know how to do something and/or fear making a mistake then, of course, you’re going to procrastinate on it. Of course, you’re going to hold back from doing anything too grand if you are not sure how the UK tax system works and what you can claim, or how to fill in your tax return. This is actually very popular. It’s why I’m in demand in January when everyone in their first year of business starts to panic and not know what to do. But it stops now. I will tell you want to do, what you can claim and where you can go to find out more information.
The following looks at the most common reasons why people come to me for guidance. Over the years I have noticed that a lack of knowledge around these facts, stops many people from filing your tax return on time, not understanding why they pay little tax one year but more the next or end up paying too much tax (or not enough), thus why I think it’s important to address them here.
Understanding the tax basics
The UK tax year runs from 6th April to 5th April so, at the time of writing, we were in the tax year 2018/2019 (6th April 2018 to 5th April 2019). The filing date for online returns is 31st January, as is the final payment. Most business owners have grasped these facts. However, the following are less widely known about until you experience them.
HMRC can ask for payments on account for the following tax year
For those with little profits or low taxable earnings, you will only ever known about payments due on 31st January for the tax year ending on 5th April the previous year. However, when your profits increase (thus tax due increases), you will find yourself paying the tax due on 31st January and 50% towards the current tax year you are in, plus a further 50% due by 31st July. These 50% requests are known as payments on account.
This can come at a shock to most business which is why I always recommend doing your tax return early so you know about stuff like this as soon as possible thus can start saving if you haven’t already got something put aside. This change takes place when the tax due goes above £1,000.
This can be better explained by an example
End of preview.
To read more, sign up to receive the FULL preview HERE. Only available until 25th November! By receiving the full preview of Tax Return Made Simple, all I ask in return is feedback by 30th November, and if you would some free advertising, a book review for insertion in the published professional edition. Then we hope you tell all your business friends about it.