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The end of the UK tax year is approaching - here's what you need to do

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Mika, Staff Writer

Thursday, 18 March 2021

As Spring emerges it’s time to take care of the housekeeping, and this extends to our finances too. If you’re a brand new business, this may be the first tax year in which you’ve had to file a return in. Or, you may have a long-established business and you want to get organised.

While talking about tax can be confusing, we’re here to break things down. Here is what you need to follow up with now that the new tax year is almost upon us. 

What is the tax year?

The tax year runs from the 6th of April to the 5th of April for each year. That means the new tax year will begin on April 6th every year. Your tax return will take into account all of your earnings up until April 5th. 

You have until January 31st to file your return. Though, the sooner you file the return, the longer this will give you to budget for the tax and national insurance you’ll need to pay if you haven’t already done so. 

Review the latest budget

Your first port of call is to review the latest chancellor’s budget which happens just before the end of the tax year. Information around tax bands, capital gains tax, and various allowances may have changed since the last budget. If you’re self-employed or have investments you need to read up on the latest information since this may impact how much you’ll owe in tax. 

How much can I earn before I need to pay tax?

At the time of writing, if you earn at least £1,000 in self-employment exclusively or in addition to regular employment, you must fill out a tax return. The current personal allowance is £12,500, meaning if you earn less than this you will still need to fill out a tax return, but won’t be required to pay any tax. 

The amount you will be taxed is only counted for earnings £12,501 and above, as your personal allowance is tax-free. 

If you claim Marriage Allowance or Blind Person’s Allowance, then your personal allowance may be bigger.  

What are the different tax bands?

For England, the tax bands are as follows:

  • Basic Rate: 20% (£12,501-£50,000)

  • Higher Rate: 40% (£50,001-£150,000)

  • Additional Rate: 45% (£150,000+)

How to stay on top of your tax

Diligent and regular bookkeeping is the best way to keep your finances in order. It’s also a requirement by the government, who can request to see your detailed accounts at any time. 

Plus, bookkeeping will make filing your tax return much easier because you’ll have a record of every transaction. This includes what tax deductions you may be eligible for, which will help ensure you don’t overpay. 

Bookkeeping is also extremely useful in creating a business projection since it will help you accurately predict your most profitable trading periods, so you can budget for those quieter times. 

Once your bookkeeping is complete, you need to submit the paperwork to your accountant on time to avoid any government penalties. It’s possible to pay your tax in one lump sum or work out a payment plan depending on your circumstances. 

To sum up

The start of a new tax year is a fresh slate. In the meantime, don’t forget about the year that’s just gone! If you aren’t great at numbers or simply lack the time to do your own bookkeeping, then you can outsource the task to a professional instead. 

Find a bookkeeper near you on Bark to get your books in order so that you don’t have to worry. This will leave you free to concentrate on running your business! 

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