What does the tax return filing deadline mean for me?

If you run a business or are a sole trader in the UK, the end of January always runs the risk of being a stressful time.

31st January is the self-assessment deadline for tax returns for the previous financial year, which often triggers a panic among those who are trying to get their financial affairs in order. However, with some planning and preparation, the process can be stress free and your tax return can be completed and filed in good time well before the deadline.

A financial year is a defined period of time for calculating annual financial accounts for businesses, organisations and individuals.

Different countries will have different regulatory accounting and taxation laws that require the submission of reports (based on the financial year) typically once every twelve months. The financial year in question does not have to reflect the actual calendar year (1st January to 31st December) so financial years vary from business to business, country to country.

However, there are normally clear deadlines in each country by which companies and some individuals have to submit their accounts and tax returns for a particular period in which their financial year falls. The tax return filing deadline is NOT the end of the financial year, and the two are often mistakenly confused with each other by those not familiar with accounts.

In Britain, the Personal Tax Year runs from 6th April in one year to 5th April in the following year. The reason why the British Personal Tax Year starts in April, and not January, is due to the historic change in calendar systems used in Britain in the 18th Century. People affected by the British Personal Tax Year are usually sole traders and individuals with one or more different sources of substantial income.

For tax returns, businesses and individuals usually do not need to submit their tax returns for one financial year until later into the following financial year, thereby giving finance directors, accountants and individuals time to fully prepare the accounts to be submitted and reviewed. So, in the UK, for the 2012-13 tax year (ending on 5 April 2013), the deadline for paper returns to HMRC is midnight on 31st October 2013 while the deadline for returns submitted online (i.e. via the internet) would be 31st January 2014.

By preparing tax returns for a financial year, an individual or their accountant can calculate the tax they owe the Government on their income. An accountant can also see whether their client qualifies for any tax deductions based on tax legislation, which supports businesses based on their assets and their expenditure.

So given this, what can you do to ensure that you are in control of your own financial year, whether as a business or individual? Here are 6 tips that will help you get all in order.

1. Contact HMRC

If you are in any doubt about what exactly your tax status is as an individual, consult with HMRC. If you only have one significant regular income from one or two employers, the chances are that you will not have to submit a personal tax return, as your tax will have already been deducted from your salary by your employer(s) and given to the HMRC.

However, if you have received significant incomes from other sources aside from your main salary (including some benefits), you may have to submit a personal tax return. Also, if you are self-employed, you will be expected to submit a personal tax return as well.

HMRC’s telephone helpline for self-assessment is 0300 200 3310, and that should be the first call you make when you start assessing your tax obligation.

All businesses (however they are constituted) are legally obliged to pay tax on their income.

2. If in doubt, consult with an accountant

Tax and accounts can be a complex business and if you are not particularly good with numbers and arithmetic and are unfamiliar with tax law, you are best off consulting with a qualified accountant.

An accountant is not just there to bring you the bad news of how much tax you may actually owe; they can also highlight legal, legitimate savings and entitlements that you may be eligible for. They will clarify, if HMRC has not already done so for you, what is and what isn’t taxable income.

An accountant is not a professional whose job is to get you out of paying tax (if you are making money, you will owe tax), but they can help you order your affairs in the correct manner so that you are not paying more than you need to.

3. Maintain good records of all income and expenditure

Whether you decide to prepare and submit your tax returns yourself or hire an accountant to do this on your behalf, you will need to have good, full and accurate books of your income and expenditureso that your tax can be calculated correctly.

You will also need to keep all relevant paperwork that relates to income and expenditure, in the event that either you or your accountant need to refer back to it to clarify the tax status of a particular transaction.

You will also need to keep all your accounts (and the associated paperwork) on file, in case your tax return is queried by HMRC and you are subjected to a tax inspection.

4. Employ a bookkeeper

Keeping accurate and up-to-date records on a daily basis can be a difficult task if you are an individual or sole-trader who is busy with servicing the needs of their own business and its customers.

It’s easy for things not to be recorded correctly or for paperwork to get lost, so if you feel you do not have the capacity to do this yourself to the standard that is needed, consider hiring a bookkeeper to help you with your accounts. It takes the pressure off your professional life and also gives you some peace of mind that your financial affairs are being documented correctly.

5. Use new technology to help you

The fact that so many now submit their tax returns online shows how technologically advanced we’ve become as a society. It is not just the Government who have all the latest tools to analyse your books; they’re readily available to you too.

Accounting software is readily available. Give serious consideration to online Cloud-based solutions(such as Prelude Accounts) that allow you to keep your accounts up-to-date in ‘real time’ and on the move from a variety of devices.

This can alleviate the need for a bookkeeper and can also reduce the cost of using an accountant.

6. Don’t wait for the tax return deadline; prepare and submit your accounts for the financial year as soon as possible

Here in the UK, there is plenty of time to prepare your accounts for one financial year before you are legally obliged to submit them – six months before you have to submit a hardcopy submission, nine months if you want to do so online.

Use this time proactively and constructively, so you do not have any last minute stresses about getting your affairs in order in time for the submission deadline and so that you know well in advance what your tax obligation for the year is going to be.

Individuals who are required to submit a personal tax return might also be required to make payments on account to HMRC during the tax year. The sooner you know how much tax you owe the better you will be able to prepare if it turns out that you owe more tax than you have already paid or maybe less than you have already paid and are entitled to a refund. For such individuals, the deadline for settling your tax liability for a tax year is the same as for submitting your tax return for that tax year.