How to Prepare for the New Tax Year

Tax concerns are a leading cause of stress amongst business owners and independent freelancers, particularly those new to the field or discipline. As the end of the tax year rolls around, more and more questions arise over how best to prepare not only for the end of the current one, but also for the start of a new one. What follow are some simple considerations to bear in mind when addressing your tax obligations.

The Tax Year – Essential Dates

First, it is important to know where the tax year lies with respect to the calendar year. In the UK, the tax year runs from the 6^th of April to the 5^th of April the following year. The peculiar timing of the tax year is a quirk of the UK’s calendar history, with Medieval England declaring the start of the year at the end of March – and with an 18^th-century shift to the Gregorian calendar requiring adjustments to ensure no taxable income was lost.

Of course, the tax year’s beginning and end are not the whole story when it comes to properly managing your own tax obligations. For self-assessment tax returns, there are additional deadlines to adhere to, regarding online or mail submission of your tax return – namely, a 31^st January or 31^st October respectively.

If you are a limited company, a separate rule-set for deadlines to follow. Following a tax guide can be helpful for your year-end tax planning endeavours, particularly if the distinction between tax year and accounting period remains confusing. Still, there are some essential undertakings for you to consider regardless your own position.

Organise Documents & Update Records

Easily the most help you can give yourself ahead of a new tax year is to spend some time organising your financial documents, and updating any records you have regarding income, expenses and dividends (more on which shortly). These all interact with your tax, whether as a business or a freelancer, in a number of unique ways; expenses reduce your income, and hence your income tax burden, while dividends can only be calculated after Corporation Tax.

Take Dividends before the 5^th April

If you are the owner-operator of your business, and you and others receive income in the form of dividends in addition to – or as opposed to salary – this opens up new possibilities for tax savings. It may be beneficial for you to consider paying yourself or others additional dividends prior to the end of the tax year, particularly if you have not exceeded your tax-free dividend allowance.

Payroll Deadlines

While your business’ accounting period might start and end at a different time to the tax year, payroll follows the tax year closely. As such, as a business, your financial team needs to ensure P60s are generated and sent to salaried workers by the end of May (before the end of the tax year). Your employee payroll records also need to be updated from the new tax year.