Tax Returns Over Turkey: with 3,275 taxpayers filing tax returns on Christmas Day last year, FreeAgent can help make an easier tax return experience this year

FreeAgent’s Chief Accountant provides tips to small business owners to help them file their self assessment tax returns before the deadline to avoid unnecessary stress, as research reveals that 18% of business owners think they will perform worse over the next 12 months.

Although the Self Assessment deadline isn’t until the 31st of January, there continues to be an increase of taxpayers in the UK choosing tax returns over turkey by using the festive period as an opportunity to submit their tax returns online with HM Revenue & Customs (HMRC). In fact, last year a huge 22,060 taxpayers submitted Self Assessment Tax Returns over the festive period, with a whopping 8,474 submitting on Christmas Eve and 3,275 submitting on Christmas Day.

While people may be missing out on festive fun during the Christmas period, filing early is encouraged by HMRC. If the deadline of 31st January is missed, HMRC will automatically issue you with a £100 penalty, and will charge interest on any unpaid tax. The cost goes up again if you fail to file within three months.

Emily Coltman FCA, Chief Accountant at FreeAgent, who provide award-winning online accounting software for small businesses and accountants, said:

“Small business owners and self-employed people have been hit hard as a result of rising prices, record inflation and the ongoing energy crisis. Our research has found that around 18% of small businesses either think they will perform worse over the next 12 months or will have to close their businesses altogether, so it’s more important than ever for SMEs to avoid unnecessary - and avoidable - costs.

“It’s therefore vital that they don’t miss the Self Assessment deadline and cause themselves unnecessary pain. The last thing businesses need at this difficult time is to incur an automatic £100 fine for missing the deadline, but it’s also important that they pay their tax on time too! If they don’t, these penalties can quickly build up and create a financial headache in the New Year.”

FreeAgent has offered some simple tips that business owners can use to get their Self Assessment sorted. These include:

Assemble all your paperwork first

Like any task, the Tax Return is best completed in bite-size chunks. I recommend collecting together all of the paperwork that you’ll need as a first step, before you start filling the form in. Here are some examples of what you might need:

• Forms P60 and P11D from your employer
• Bank interest certificates
• Pension income certificates
• Details of any Gift Aid donations you’ve made to charity

Make sure you’ve got the right year

When you’re collecting your paperwork, make sure it’s for the right tax year - that’s the year that finished on 5th April 2023. Don’t make the mistake of using a P60 with a previous year’s salary on it, because even if you were earning the same salary, the tax figure may well be different year-on-year.

If you’re self-employed, then you’ll need to include on your Tax Return your business’s profits, because that’s what you’ll pay tax on. Be aware that if you don’t draw up your accounts to 31st March, 5th April or any date in between, and you’ve been trading a while, then the figures you need to include are your business’s income and day-to-day running costs for the accounting year that finished in the year ended 5th April 2023. For instance, if you draw up your accounts to 31st December each year, then on this Tax Return, you need to include your income and costs for the calendar year 2022 - because the 31st December that falls in the tax year ended 5th April 2023 is 31st December 2022.

What’s the right amount of bank interest?

You need to include on your Tax Return the total amount of interest your bank was due to pay you in the tax year ending 5th April 2023.

Suppose you have a joint bank account with your partner or spouse? - Include your share of the interest on the account.

If you are running a business, then any interest the bank paid on its bank account goes on your Tax Return, unless your business is a limited company, in which case the bank interest belongs on the company’s Tax Return, not yours.

If you have an ISA, leave any interest you’ve received on the ISA off your Tax Return altogether.

Marriage Allowance: to give or to receive?

All taxpayers, except the highest earners, are entitled to receive some of their income tax-free each year, up to the Personal Allowance level (which is £12,570 at the moment). If your income is below that level, you will be what’s called a non-taxpayer. If you don’t pay tax at any rate higher than the basic rate (20%), or, in Scotland, the intermediate rate (21%), and your partner or spouse is a non-taxpayer, then they may be able to transfer some of their Personal Allowance to you so that you save some tax. This transfer is called Marriage Allowance. Be careful though, not to enter this the wrong way round on your Tax Return - if you are paying tax at the basic or intermediate rate, you can receive Marriage Allowance, and if you are a non-taxpayer, you can transfer it. It only works this way round.

Don’t wait till the last minute!

It’s tempting to put off filling in your Tax Return up until the end of January - but don’t! Not only are you more likely to make mistakes if you’re trying to fill the form in a rush, but you may also encounter log-jams in HMRC’s online filing service as lots of other taxpayers all try to file at once.