If you're a sole trader or a small business owner who must submit a self-assessment tax return each year, this guide will help you navigate the process and manage your tax payments effectively.
Key Deadlines
Understanding the critical dates for your tax obligations is essential to avoid penalties:
- Tax Year: The last tax year started on 6 April 2023 and ended on 5 April 2024.
- Online Tax Return Submission: If you are filing online, you must submit your return by midnight on 31 January 2025.
- Payments on Account: These are advance payments towards your next year's Income Tax. Each payment on account is half of your previous year's tax bill, and the deadline is 31 July 2025.
Proper financial planning can help you meet your tax obligations without stress. Here are some effective strategies:
1. Set Aside Money in a Savings Account
Building a habit of setting aside a portion of your income each month can ensure you have enough funds to cover your tax bill. The amount you should set aside depends on your gross annual earnings:
- Earnings between £12,571 and £50,270: Set aside 20% of your monthly income.
- Earnings between £50,271 and £125,140: Set aside 40% of your monthly income.
2. Set Up a Budget Payment Plan with HMRC
You can arrange a Budget Payment Plan with HMRC to make weekly or monthly Direct Debit payments towards your next Self Assessment tax bill. This method allows you to spread out your payments, making it easier to manage your finances. Payments made under this plan will reduce the amount due at the payment deadline.
3. Payment Plan for Unpaid Tax Bills
If you are close to the payment deadline and do not have enough funds to pay your tax bill, you can set up a Payment Plan with HMRC. This is known as a 'Time to Pay' arrangement, allowing you to pay your tax bill in instalments.
To qualify for setting up a Self Assessment payment plan online, you must:
- Have filed your latest tax return.
- Owe £30,000 or less.
- Be within 60 days of the payment deadline.
- Not have any other payment plans or debts with HMRC.
HMRC will require information about your income and spending to set up your plan.
By following these steps and planning ahead, you can manage your tax payments effectively and avoid any last-minute financial stress.
If you need any help with your Self-Assessment tax return contact us. Louise Warden is the lead for personal tax planning and will be more than happy to support you. Call us on 01623 490 120 or email