Paper tax return deadline approaching
The deadline is just one of a number of dates that self-employed people need to a note make of in a year that has seen many workers’ incomes plummet due to the coronavirus.
Although only 6% of people who complete a tax return use the paper version, the deadline can be a good prompt to get started on sorting out your tax.
If you’re submitting your return online and want to defer payments, you’ll need to send the form in before the 31 January deadline.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: At this point, you have time to find or re-order any lost paperwork, make sure you claim for everything you can, and if you find the whole thing too much, you should still be able to find an accountant to do it for you.
“If you can’t afford to pay the full debt on time, it gives you chance to work out what you can afford, set up deferred payments, and put together a budget to help you make ends meet with more demands on your income.
“If you can afford to pay, by starting early, you have time to consider the things that could save you time and money next time. This can include moving shares and funds online so you’re not forced to track down endless pieces of paper, and moving them into an ISA so you don’t need to keep reporting dividends at all.”
When are tax payments due?
The government allowed self-employed people to defer July 2020’s payment on account – reflecting that fact that many people will have spent some or all of these funds.
This payment will be due in January, along with any balancing payment and next year’s first payment on account.
But if you were unable to work due to coronavirus, and didn’t qualify for help from the government, there’s every chance you will have dipped into funds you set aside to pay your tax bill.
Even if you did qualify for help, you had to wait weeks for your payment and then will have received less than your usual income, so may well have used your tax cash to get by.
If you’re still relying on the government grants, the struggle gets much harder from next month, as it drops to just 20% of your usual profits.
If you can’t pay at that stage, you’ll be able to stagger payments throughout 2021.
However, you’ll pay interest on the debt, and will need to make these payments at the same time as putting money away for next year’s tax bill.
Even if your income has recovered this could be a real struggle. If it hasn’t bounced back, you’ll somehow be expected to do this on even less income.
Royal London has warned that many self-employed people will face tax bills which bear no relation to coronavirus-ravaged earnings.