6th April marks the first day of the new tax year. Here's everything you need to know to start the new tax year off right.
The 6th of April 2021 marks the first day of the new tax year. This moment often brings about changes to taxes and kicks off some financial admin, like tax returns.
Despite the extraordinary circumstances we are all currently facing, this year is no different. So, we wanted to help you start the new tax year right.
Most of the rates will remain the same this year based on the budget announced a few weeks ago. Here’s the key information you need to know:
Here are some dates that you need to bear in mind throughout the year.
They may not all be relevant to you, but it’s worth putting these in your diary and we'd always recommend speaking with an accountant if you're unsure about what you need to do and how to prepare.
If 2020/21 was your first year of being self-employed and you didn’t complete a tax return last year, the first thing you need to do is register for Self-Assessment and Class 2 National Insurance.
The deadline to register is the 5th of October the tax year after you started trading. So, for example, if you started working as self-employed on 1 May 2020 you've got until 5 October 2021 to register. Although it’s best to get this done sooner rather than later. You'll need to wait for a code to arrive in the post, so make sure you leave plenty of time to do it.
When you register, HMRC will:
We strongly recommend that you do this as soon as you can because it’s best to be in HMRC’s system ready to go if any additional Government support is announced for the response to Covid-19.
We've also outlined all of the Covid-19 government support that's available for the self-employed community.
If you’re registered with HMRC you can now submit your 2020/21 tax return. Although you have until 31st January 2022 to do so (this is also the deadline to pay your tax bill), it’s always good to get ahead of the game and get it out of the way whilst everything is still fresh in your mind.
If you do it now and find you haven’t saved enough money to cover it, you’ve still got plenty of time to pull the funds together.
When you’re ready to tackle your tax return, here’s a list of everything you’ll need:
One point worth noting is that you may need to make advance payments towards your tax bill, these are known as ‘payments on account’ and are made twice a year - 31st January and 31st July.
They’re designed to help you spread out your tax payments, but they often come as a surprise when your first tax bill arrives.
So for those of you completing your tax return for the first time this year, it would look a little like this:
Imagine you’re preparing your Self-Assessment tax return for the 20/21 tax year. You’ve worked as a sole trader for the full tax year and have no other sources of income. After all, calculations are considered your tax bill comes to £5,000.
Your payments to HMRC will then be broken out as follows:
So, that means rather than just paying the £5,000 you owe for 2020/21, you’ll be asked for an additional £2,500 as an advance on next years’ tax bill.
If you have any questions or would like to chat anything through feel, please free to get in touch with the team through the app anytime. We’re always happy to help. And if you're ever in doubt or in need of some reassurance, it’s always worth speaking with an accountant.
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As part of HMRC’s Making Tax Digital, sole traders will soon be required to complete 4 tax submissions per year instead of 1.
Take a look at the latest sole trader tax rates for the 2021/22 as well as our advice on how to prepare for the new tax year.