Whilst the festivities are in full swing in December, and everyone’s minds are on having a few days off over the Christmas and New Year period, it can’t be ignored that the festive season is also, the tax season.
With this time of year comes filing dates and payment dates to settle your responsibilities for 2015. However, there is also now just a small window of opportunity before March 2016, to save tax for the current tax year.
31 January deadline – your responsibilities
In just six weeks, on 31 January 2016, any contractor or freelancer who has earned income under self-employment or drawn dividends from a privately owned limited company, during the year ending 5 April 2015, will be required to file a tax return, under self-assessment.
The same deadline applies for paying any tax due on these profits as well as paying the first “payment-on-account”, if calculations require it.
Our seasonal guidance is as follows:
- If you have been issued with a “Notice to file a tax return” but have not taken any steps as yet to calculating your tax liability, time really is of the essence. Seek advice from an accountant as soon as possible.
- If your accountant is mid-way through your tax calculation but is awaiting missing information from you, set yourself a deadline in the coming weeks to get everything organised. An accountant can only work with the information they are provided, so there needs to be co-operation from you in order to meet deadlines.
- If you already know your tax liability for January, as your tax return has been filed, do you have the funds available to pay your bill before the deadline of 31 January? Paying in full will ensure you are not subject to unnecessary interest and surcharges.
- If you are unable to pay your tax bill in full, there could be an option to reduce your “payment-on-account”. This is more usual for self-employed freelancers and contractors and you would need to demonstrate that your profits have decreased in the current tax year, so keeping up-to-date records is essential. An accountant can help you crunch the numbers to see if this is feasible.
Looking forward – simple tax planning for 2016
Looking at the current tax-year, this ends on 5 April 2016, so even if your 2015 tax return is all done and dusted and filed away safely and the payment is waiting in your bank to pay across in the coming month or so, you should really, already, be looking forward to making sure your next tax bill is as minimal as possible.
Here are a few things you can do to ensure your tax bill stays low:
- Get a tax estimate for 15/16. A tax estimate based on the last 9 months (April – December 15) will be able to predict, with a good degree of accuracy, what your total profits will be for the entire 12 months will be, and subsequently the tax that will become due.
- Take action to reduce your tax. If your tax bill is looking higher than usual, an accountant can help you with last-minute tax planning to try to reduce this for you. It could be through carefully planned expenditure, to offset against your income, or tax planning could involve a look at pensions, ISA’s or other investment vehicles which are tax efficient.
- Commit to using an electronic system to record income and expenses. If you don’t have a system that records your income and expenses efficiently then you will be wasting valuable time and efforts. Many systems now draw information direct from your bank account, to save time and ensure accuracy.
- Commit to regular reporting in 2016. An electronic record-keeping system will enable you to keep a track of your income and expenses and view reports each month, which can be analysed for growth or decline, as well as to estimate future tax bills.
Tax planning doesn’t have to be “taxing”, it just needs to be timely. Planning ahead and regular reviews of your business income and expenses can be enough to keep your tax bills low.
AJN Accountants offer a choice of two highly efficient record-keeping systems free of charge to all contractors and freelancer clients.
Get a free trial. Save time and keep your tax bills low.