Check if you need to send a tax return

Check if you need to send a tax return

If you normally file a Self-Assessment tax return, you will need to send it to HM Revenue & Customs (HMRC) for the tax year 2022 to 2023 and pay any tax you owe by 31 January 2024.

Once you have registered for Self-Assessment, you must file a return by law, even if you have already paid all the tax you owe or think you don’t owe any tax.

Not sure if you need to file a tax return?

Use this online tool to check if you need to complete a Self-Assessment tax return.

If you have already sent a tax return for the 2022 to 2023 tax year, or HMRC has been in contact to tell you that you don’t need to send one, you don’t need to do anything else just now.

If you no longer need to send a tax return, you need to let HMRC know. If you don’t, you may have to pay a penalty.

How to tell HMRC if you don’t need to send a return:

  • if you were self-employed but have stopped working for yourself, use HMRC’s online form; or
  • if you’re not self-employed, HMRC has created some guidance and an online form you can use.

See: Check if you need to send a Self Assessment tax return – GOV.UK (www.gov.uk)

Retiring soon? Check your entitlement to the State Pension now!

Retiring soon? Check your entitlement to the State Pension now!

If you are planning to claim the UK state pension you should check your national insurance (NI) record before 5 April 2023. At present, voluntary contributions can be made to plug gaps back to April 2006, but this will be curtailed from April.

National insurance (NI) contributions are made by employed and self-employed
individuals based on their earnings. To qualify for the maximum ‘new state pension’
(received by those retiring on or after 6 April 2016) a person must have 35 qualifying
years of NI contributions. For part payment of the ‘new state pension’ a person must
have contributed for at least 10 years. For those whose NI record started before 6
April 2016, different rules may apply; the number of required years of NI
contributions/credits to obtain the full state pension may be higher.

If a person has not contributed enough before reaching state pension age, they may
not be able to claim state pension, or receive the full state pension amount.

To help protect state pensions and other benefits it may be beneficial for people to
make voluntary NI contributions to top up their contribution history, potentially
increasing the amount of state pension they will receive. We recommend you take
financial advice when making that decision as, amongst other factors, it requires
predicting what contributions will be made before state retirement.

Normally, it is only possible to make voluntary contributions for the past six tax years.
Currently there is an extension in place. Individuals can fill gaps in their NIC history
from 6 April 2006 to the present date by making voluntary contributions.

From 6 April 2023, the timeframe for making voluntary contributions will revert to the
normal six years. This means that in the 2023/24 tax year, it will be possible to make
contributions going back to the 2017/18 tax year only.

See: Check your national insurance record before 5 April 2023 | ICAEW

HMRC assessment changes

HMRC is changing how they assess profits for some sole traders and partnerships

How HMRC assesses profits for sole traders and partnerships who use an accounting date between 6 April and 30 March will change from 6 April 2023. This change will not affect companies.

Your accounting date is the last day of the period that you prepare your accounts for. You choose your accounting date when you set up your business and will normally make your accounts up to that date every year. Under the current rules, you are taxed on profits for the accounting date that ends in a given tax year. For example, if your accounting date is 30 November, for the 2022 to 2023 tax year you will be taxed on profits in your 30 November 2022 accounts.

From 6 April 2024, you will be assessed on your profits for each tax year that runs from 6 April to 5 April. This change will affect how you fill in your tax return if you use an accounting date between 6 April and 30 March. The way your profits are assessed if you use an accounting date between 31 March and 5 April will not change.

There will be a transition year from 6 April 2023 to 5 April 2024 to allow any overlap relief that you may be due to be used against your profits for that tax year. You may be due overlap relief from when you started to trade, or if you subsequently changed your accounting date.

How your profits for the 2023 to 2024 tax year will be assessed 

The changes will mean the amount of tax that you owe in the 2023 to 2024 tax year may change if you use an accounting date between 6 April and 30 March. You will be assessed to tax on both:

  • The 12-month accounting period you have previously been using (the one that ends in 2023/24).
  • The rest of the 2023 to 2024 tax year — minus any overlap relief that you may be due — spread over 2022/23 and the next 4 tax years. You can spread these ‘excess’ profits over a shorter period if you wish.

Example (assuming no overlap relief is available):

  • Your accounting period is from 1 January to 31 December.
  • Your assessable profit is £32,000 from 1 January 2023 to 31 December 2023.
  • Your assessable profit is £18,000 from 1 January 2024 to 5 April 2024.
  • The £18,000 profit is divided equally and assessed over the next 5 tax years at £3,600 a year (£18,000 divided by 5).
  • In the 2023 to 2024 tax year, your total assessable profits will be £35,600 (£32,000 plus £3,600).

Any increased profits from the 2023 to 2024 tax year will be treated in a special way to minimise the impact on benefits and allowances.

How overlap relief can be used

If you set an accounting date between 6 April and 30 March when you started your business, or if you subsequently changed your accounting date, you may have paid tax twice on some of your profits and be entitled to ‘overlap relief’. 

Usually, businesses can only use overlap relief to get this tax back when they stop trading or change their accounting date. However, HMRC will allow a business with unused overlap relief to use it in the 6 April 2023 to 5 April 2024 transition year. 

In the example above, any overlap relief would be deducted from the £18,000 in step 3, also thereby reducing the profits spread over the subsequent 4 tax years.

Please give us a call on 0131 440 1373 to speak to us about how much overlap relief you may be due in the future.

Changing your accounting period

You do not have to change your accounting period and can continue to use whatever accounting date suits your business.

However, you may want to consider changing your accounting date to 31 March or 5 April. If you do, this will align your accounting period with the end of the tax year, and you will not need to apportion profits on your tax return every year.

HMRC have confirmed that the restrictions on changing your accounting date that are currently in place will be lifted starting from the tax return for 2023 to 2024. If you change your accounting date in your tax return for a year before 2023 to 2024, you will not be able to spread any extra profits that arise in the tax year you made the change in.

Please give us a call on 0131 440 1373 because we will be able to clarify this change and discuss your options directly.

Declare your COVID-19 payments

Self-Assessment: Declare your COVID-19 payments

HMRC is reminding their Self-Assessment taxpayers that they must declare COVID- 19 payments in their tax return for the 2021 to 2022 tax year. More than 2.9 million people claimed at least one Self-Employment Income Support Scheme (SEISS) payment up to 5 April 2022. These grants are taxable and should be declared on tax returns for the 2021 to 2022 tax year before the deadline on 31 January 2023.

SEISS payments

The SEISS application and payment windows during the 2021 to 2022 tax year were:

  • SEISS Four: 22 April 2021 to 1 June 2021
  • SEISS Five: 29 July 2021 to 30 September 2021


Other payments

SEISS is not the only COVID-19 support scheme that should be declared on tax returns. If you received other support payments during the 2021 to 2022 tax year, you may need to report this on your tax return if you are;

  • Self-employed
  • In a partnership
  • A business

See: Reporting coronavirus (COVID-19) grants and support payments – GOV.UK(www.gov.uk)

At James Anderson + Co we specialise in helping our clients manage their tax returns. If you think this is a service that your company would benefit from, please get in touch through our contact page, or give us a call on 0131 440 1373, we’d be happy to he 

Making Tax Digital for income tax

Making Tax Digital (MTD) for income tax – Only 18 Months left to comply

Self-employed businesses and landlords with annual gross business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2024.

Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay taxes based on your business activity during the year. You can upload and update your tax account in real-time.

If you own a business or are self-employed and pay income tax, national insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD-compatible software, and update HMRC at least quarterly via your digital tax account. Eventually, this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.

MTD for Income Tax should become law from 6 April 2024. It will initially apply to the self-employed and those who receive income from property, with gross income from these sources combined above a threshold of £10,000.

The government is running a pilot scheme where businesses can use the online service Making Tax Digital for Income Tax.

See: Sign up as an individual for Making Tax Digital for Income Tax – GOV.UK(www.gov.uk)

What should I do about MTD?

Talk to us – the good news is that you can reduce your running costs and streamline your accounting by complying with the new rules! 

In the last two years, we have worked with many other clients to help them comply with MTD and streamline their accounting.

Just suppose you had a system where your bank feeds your data directly into your accounts on a DAILY basis and you can take a photo on your phone of a purchase invoice and it is posted automatically. You can see your results, who owes you money, who you owe money to and your business bank balance 24/7, 365 from your smartphone.

We have MTD-compliant cloud accounting packages that give you:

  • A clear picture of your current financial position, in real-time.
  • Automatic updates that mean you can spend more time doing what you enjoy.
  • Your accounts 100% online, so there’s no software to install and everything is backed up automatically. Updates are free and instantly available.

Please contact us about helping you to comply with the new rules. We are cloud accounting specialists and can train and support you with the right software. Please get in touch through our contact page, or give us a call on 0131 440 1373, we’d be happy to help! 

 

Business Energy Bills

The UK Government has announced plans to help businesses with energy bills

Through a new Energy Bill Relief Scheme (EBRS), the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including UK businesses, voluntary sector organisations like charities and public sector organisations such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices. This support will be equivalent to the EPG put in place for households

It will apply to fixed price contracts agreed on or after 1 April 2022, as well as to
deemed, variable and flexible tariffs and contracts. It will initially apply to energy
usage from 1 October 2022 to 31 March 2023, before a review is undertaken to
inform decisions on future support. The savings will be first seen in October bills,
which are typically received in November.

As with the EPG for households, customers do not need to take action or apply to
the scheme to access the support. Discounts will automatically be applied to bills.

See: Energy Bill Relief Scheme: help for businesses and other non-domestic customers – GOV.UK (www.gov.uk)

Household Energy Bills

The UK Government has announced plans to help households with energy bills

To provide immediate support for households, an Energy Price Guarantee (EPG) will cap the unit price that consumers pay for electricity and gas. This will mean the average household will pay no more than £2,500 per year for a period of two years from October 2022, and is expected to save at least £1,000 a year, although savings for individual households will vary according to their energy use. The discount is automatic and there is no need to apply or contact energy suppliers. 

The EPG is in addition to the £400 support all households will receive from the Energy Bills Support Scheme (EBSS) over the coming winter. 

The government will also provide an additional payment of £100 to compensate for the rising costs of alternative heating fuels for UK households not able to receive support for heating costs through the EPG, for example if they are living in an area of the UK that is not served by the gas grid.

See: Energy Bills Support Factsheet – GOV.UK (www.gov.uk)

Cash Flow

Let's talk about Cash Flow

Let’s talk about cash flow, one of the most important issues in many businesses…

Are you concerned about future trading conditions? If you are then it’s time to take some time to reflect on where you are and what could happen in the next few months. 

Cash flow and business planning in these uncertain times may appear problematic, but there are some practical steps that you can take to minimise potential disruptions to your business:

  • Review your budgets and set realistic and achievable targets for the remainder of 2022 and into 2023
  • Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues
  • Review and flow chart the main processes in your business (e.g. sales processing, order fulfilment, shipping, etc.) and challenge the need for each step
  • Put extra effort into making sure your relationships with your customers are solid
  • Review your list of products and services and eliminate those that are unprofitable or not core products/services

At James Anderson + Co we specialise in helping our clients manage their cash flow, we do this by preparing and updating detailed cash flow forecasts by using the latest and most powerful software. 

If you think this is a service that your company would benefit from, please get in touch through our contact page, or give us a call on 0131 440 1373, we’d be happy to help!