Your taxes and any other deductions are usually all managed for you by your employer when you work as an employee. Self-employed people don’t have quite the same level of luxury, and working for yourself means that taxes, tax returns, and all that fun stuff are your responsibility.
If you’re brand new to all this it can be a bit confusing trying to work out what you need to submit, when, and who to. These are the kinds of questions we answer all the time, so in this article we go over some of the most common types of tax returns affecting small businesses, and which ones you should have on your radar.
You’ll normally need to submit a Self Assessment tax return if you receive an income and it’s not already taxed elsewhere (such as by your employer). This might be because you’ve registered for self-employment as a sole trader, as a partner in a partnership, or because you’re a company shareholder and receive dividend payments.
The money you earn might not be your only source of income. For example, someone who works for their employer full-time might still need to submit a Self Assessment tax return if they also earn money from a side-hustle. If your self-employed income is less than £1,000 in a tax year you might not need to register (or pay tax) – all thanks to the Trading Allowance.
Self Assessment isn’t just for self-employed people though. You might also need to submit this type of tax return if you earn more than £100,000 per year, receive Child Benefit whilst earning more than £50,000 a year, or even if you receive an income from renting out a property.
When do I need to send my Self Assessment tax return?
The Self Assessment deadline is different depending on how you choose to submit your tax return. At the moment you can still submit paper-based tax returns, although HMRC do place more emphasis on submitting online, and are still planning to introduce Making Tax Digital for Income Tax Self Assessment (MTD ITSA).
Submit a paper-based Self Assessment tax return: If you prefer to file a paper tax return while you still can, make sure HMRC receive it no later than 31st October following the end of the tax year being reported on.
Online Self Assessment tax returns: Most people submit their Self Assessment online and the deadline for this is 31st January following the end of the tax year being reported on (so you get three extra months if you submit online rather than by post).
The deadline to pay your Self Assessment tax bill is 31st January no matter which method you use to submit your tax return.
Payments on account
If your Self Assessment tax bill comes to more than £1,000 HMRC will ask you to make an advance payment towards next year’s bill. Known as ‘payments on account’, the amount they ask you to pay towards next year is equivalent to half of this year’s bill – whatever that amount might be.
1st payment on account: The deadline for paying the first installment is 31st January – the same deadline for submitting and paying the bill for this year’s tax return. You can see why it might be an unpleasant shock!
2nd payment on account: 31st July following the end of the tax year being reported on.
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Company Tax Return
Your personal finances and assets are viewed separately from those of your business when you’re the owner of a limited company, which means you’ll need to report and pay tax in a different way to a sole trader or partner. The process for this partly depends on the way in which you pay yourself from the business.
If you’re also a company shareholder and receive dividends, you’ll need to submit a Self Assessment tax return to report these and pay dividend tax.
Company Tax Return deadlines
The submission deadline for a Company Tax Return is 12 months after the end of the accounting period which it relates to ended. The limited company will need to pay Corporation Tax on any profits that it makes in that period. If a company’s taxable profits are:
£1.5 million or less, then the tax bill must be paid within 9 months and 1 day after the close of the accounting period.
More than £1.5 million, Corporation Tax will need to be paid in instalments, each with its own respective deadline.
Some businesses choose to register for VAT on a voluntary basis because it’s more tax efficient for them, but VAT registration isn’t compulsory unless your taxable turnover meets the £85,000 registration threshold in a 12-month period.
Once you register for VAT you’ll need to submit regular VAT returns to report the VAT that you collect on sales, and what you pay on any business purchases.
This is one for the employers (or if you’re the director of your own limited company, and pay yourself a salary through PAYE). PAYE (it stands for Pay As You Earn) is the process employers use to collect income tax, National Insurance, and other contributions from their employees’ pay. Employers report all this information to HMRC each time they pay their staff, and pay on any deductions they make. We go into a lot more detail about this in our Guide to PAYE!
Understanding tax can be tricky, we get it, which is why we’re here to help. Find out more about our online accountancy services by calling 020 3355 4047, or get an instant online quote.
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About The Author
I've worked in the accountancy sector for more than 15 years, and have extensive experience supporting sole traders, partnerships, and SME's. Learn more about Lisa.