Partner Article

Top tips ahead of the January 31 tax deadline

The only word that comes to mind this late in the month is “Hurry!” as we can no longer hide from the fact that the 31st of January is steadily approaching. Online Self-Assessment can be a daunting task, especially for many SMEs who have done little or no planning for the forthcoming tax deadline. They will find this time of year particularly difficult, meaning that January could have been a relatively unnerving month. The truth is, there’s not much you can do other than be as prepared as possible for the date.

Self-assessment

Company owners, shareholders or directors must complete their self-assessment income tax return by January 31st. The paper version was due on the 31st October, but some may have opted to complete their tax return online. Don’t be fooled however, as the online version is definitely not shorter.

One good thing about the online version is that the HMRC website gives you an instant calculation of what you owe. If you’ve done your homework, this figure shouldn’t come as a complete surprise – but it’s usually best to have an accountant calculate the accurate amount before this point.

Company owners, who receive some income as salary, must include that income on the self-assessment form - from their P60. This will not result in any more tax to pay – as it should already have been taxed through PAYE.

You may not have a P60 form from your employer, but your March 2013 pay slip is likely to contain much of the same information. Bank statements also disclose much of what you need to know, how much you paid in pension contributions, charitable donations, and so on.

Any income received in the form of dividends, together with any interest on savings or property rent received, may result in tax to pay.

If earnings are less than £100,000 per year, the first £8,105 of the total income, including salary, is tax-free – this holds true for the tax year ending in April 2013. For salary, interest or rental income, the next £34,370 is taxed at the basic rate of 20%, with any additional income (up to £150,000) taxed at the higher rate of 40%.

Top Tips

• Early assessment – this way you will have a much better idea of what you are likely to pay on your income tax bill and prevent any unforeseeable surprises if you plan ahead.
• Be aware of expenses – working out which expenses are eligible isn’t the easiest task, so it may be best to take advice from your accountant as this could save you a considerable amount on your tax bill. You could be missing out if you don’t assess this in detail.
• Finance management – up-to-date record maintenance is vital and you should aim to make this a habit.
• Know your strengths – you know your business better than anyone else, but if you struggle with numbers, hire an accountant for regular financial advice. This way you will get a better understanding of what your tax liability is.
• Make estimates - if you do not have the exact figures, use estimates. Ensure figures are as accurate as possible and include a note as to which figures you have estimated. For now providing educated estimates will save vital time, but exact figures will be needed at a later stage.
• Don’t forget pensions - make sure you include any pension contributions as these are very tax-efficient and will reduce the amount of tax you have to pay
• Plan for the future - if you own a limited company and your spouse is a lower rate or non-taxpayer, it may be beneficial for them to own shares in the company, so that they can receive income in the form of dividends and be taxed at a lower rate.

Finally, remember to deduct all eligible expenses. HMRC allows you to take into account certain costs, such as student loan repayments, charitable donations, work expenses not reimbursed by your company and personal pension contributions when submitting the Self Assessment tax return. Remembering to include these costs as it can make a considerable difference to your tax bill!

John Hoskin is director of the low cost online accountants for SMEs, CleverAccounts.com.

This was posted in Bdaily's Members' News section by John Hoskin .