The importance of budgeting for income or corporation tax for self-employed people
A lot of of us dream of running our own business, and with hard work and careful planning, self-employment can be hugely rewarding and fun. But due to the fluctuating incomes many self-employed people face, running your own business requires careful money management. Whilst you may have a strong overall income, the flow of money may not always be regular and it can take weeks and even months between pay cheques. It is therefore very important to manage your money carefully. Running out of cash before you get paid again could mean living on credit and interest payments may prove to be very costly. Income tax is paid by sole traders and partnerships and corporation tax is paid by limited companies. Regardless of whether you are a sole trader, partnership or work via a limited company it is particularly important to budget for the tax due on 31 January each year. Unlike employment income, your tax is not deducted at source and as you receive your income untaxed it is easy to assume that all of this is yours. However, some of this income will be paid in tax and should be budgeted for in order to avoid the shock of a high tax bill. It is worth noting at this point that if income or corporation tax has not been budgeted for and you delay payment, you may have to pay fines for late payment (as highlighted in more detail in the previous blog post). A good accountant can help you with budgeting by calculating how much of your income will be paid to the taxman and can also advise on how to minimise this. You can also use the 'Self-employed ready reckoner' tool on the HMRC website for an estimate of how much money to set aside. And this is usually around a 80:20 split between you and HMRC. Furthermore, you can also set up a 'budget payment plan' which lets you make regular weekly or monthly payments in advance. These methods will save you a lot of stress and will help you better manage your money, especially during the Christmas period. If you need any further help please do not hesitate to contact us and we'll be sure to offer you bespoke advice depending on what best suits you. By Hamza Habib at Tax Affinity Accountants Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Surbiton in Kingston upon Thames they are considered in the industry to be experts accountants for small businesses. Helping and supporting business throughout the UK, they regularly help new and established businesses to succeed. For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.
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The Importance of Submitting Personal Tax Returns to HMRC Before 31 Oct Deadline
The UK tax year starts from 6 April to 5 April the following year. You’ll need to send a tax return if in the last tax year
Chargeable Income It is your responsibility to notify HMRC of any income arising that makes you liable to tax. Notification must be received by 5 October otherwise you will have to pay a penalty. Filing a Tax Return The deadline for filing a tax return by post is midnight on 31 October. You will have to register by 5 October so we recommend registering well in advance as the process can take 4 weeks. If you miss this deadline, don't worry as you can file your tax return online by midnight 31 January the following year (3 months later). To file online, you will again need to register well in advance with HMRC for this service as the process could take several weeks. However a good accountant has the resources and expertise to file your tax return online without needing to register. If you file your tax return late, you will face a £100 penalty even if you do not owe any tax. The following penalties also apply for late filing of tax returns:
There is also a penalty if you file your tax return incorrectly depending on your behaviour.
Paying Tax The deadline for paying tax is 31 January and there are three charges for late payments.
By Hamza Habib at Tax Affinity Accountants Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Surbiton they are considered in the Industry to be experts accountants for small businesses. Helping and supporting business throughout the UK, they regularly help new and established businesses to succeed. For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends. |
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