Despite being only a month into the new tax year, we believe there’s no time like the present to get started on your next tax return.
As soon as the 2020/21 tax year came to a close on 5 April 2021, our attention turned to getting a head start on 2020/21 tax returns.
Of course, they don’t need to be submitted until on or before midnight on 31 January 2022 but early filing brings peace of mind.
If you’re one of the few taxpayers who still files paper returns, this is more of a priority with the midnight deadline on 31 October 2021 to consider.
Self-employed income support
The elephant in the room as far as the 2020/21 tax year is concerned surrounds the self-employed income support scheme (SEISS).
From the first three SEISS grants alone, £21,570 could have been claimed – and the fourth grant overlaps between 2020/21 and 2021/22.
Any funds you received through the SEISS are liable for income tax and self-employed National Insurance contributions (NICs).
If you did receive a SEISS grant in 2020/21, you need to report and pay any tax that arises if you exceed the personal allowance (£12,500 in 2020/21).
These three SEISS grants and part of the fourth grant all count as taxable income from the previous tax year and you must declare it.
Keep hold of the amount, or amounts, you have claimed and the claim reference number for this purpose.
What other records are needed?
The type of records you need to keep to get started on your tax return depend on the number and complexity of the claims you need to make. Usually, they’re either financial records or documents you receive.
Sole traders and partnerships must have records of any income the business received and expenses incurred in 2020/21 to get started on their tax return now. Invoices and receipts are essential for this purpose.
If you’re self-employed and generated profits during 2020/21, you also need to declare that as income on your self-assessment tax return. It’s also a requirement to declare any income arising from investments, savings and pensions during the previous tax year.
As a rule of thumb, always keep any records you have for the past six years. HMRC can, and does, undertake random investigations and these records can help prove you paid the correct amount of tax.
Advice for first-timers
Before COVID-19 struck the UK, the self-employed population had passed five million for the first time. However, the number fell to around 4.3m in February 2021.
If you were one of the brave souls who became self-employed during the pandemic, you have until 5 October 2021 to register for self-assessment to file your 2020/21 tax return.
Our personal tax planning service can handle your first tax return, just like we do for our long-standing clients on an annual basis. To find out more, email us at contact@thomasbarrie.co.uk or call us on 0141 221 257.