For many PRs, the start of a new year heralds a certain inevitability: it’s time to think about self-assessment tax returns.
But the impending deadline doesn’t need to be a headache. The key lies in what PRs do every day: be proactive. Waiting until the last moment before the deadline is a surefire way to make your self-assessment a painful process.
So, what should PRs be doing now to tackle tax head-on?
1. Submit last year’s return as soon as you can
PRs are excellent communicators and planners, but, like many small business owners and self-employed people, they are more comfortable delivering services than running the books. Their natural instinct is to ignore the deadline for as long as possible. In fact, our data shows that most people file their tax return online in the final 72 hours before the 31 January deadline. By being proactive, you can tick it off your to-do list, have time to make sure it’s accurate and be forewarned of your impending tax bill.
2. Keep a thorough paper trail all year round
Using an invoicing software is a good way to do this. This will allow you to invoice electronically and give you all the information you need for a tax return at the click of a button.
3. Prepare for the effects of Covid-19
The impact of Covid-19 won’t be felt in your tax return until 2021. If you’re one of the many small businesses and sole traders that took advantage of the government’s support packages, make sure you understand its implications for the 2020/21 self-assessment and start to plan how you will pay for it.
4. Plan beyond this year’s self-assessment
There’s no time like the present for starting your 2020/21 tax return. Doing it now will give you a good idea of next year’s potential tax bill and the impact of Covid-19, so you have plenty of time to save.
Self-employed PRs say:
Joanna Drake, Manchester: “My career is built on my strengths, which is creating and executing great PR strategies. I’m nowhere near as good at the financial side and, as a new freelancer, it’s relatively alien to me. I use a leading online tax return software package to keep a clear picture of my upcoming tax obligations, but it also helped save me money as it prompted me to add in lots of things that were tax deductible – like working from home, my laptop and various subscriptions and expenses.”
Sophie Chadwick, Cheshire: “I’ve learned from experience that it pays to be on top of your finances all year round; it’s definitely not a job to do the week before the self-assessment deadline. It’s far better to have a clear idea of what your potential tax implication could be – with as much warning as possible – so you can put money aside and not receive a shock bill. My advice would be to get an accountant or accountancy software asap.
Written by Mike Parkes, technical director at GoSimpleTax
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