Every business has various peaks and troughs in cashflow throughout the year, and a big part of that is your tax deadlines. While forgetting important dates can be expensive, keeping track of timelines can help you ensure you have enough money coming in to cover bills when they’re due.
Even better, planning ahead can save you a lot of stress – and even a bit of cash. Here’s what you need to know about paying your taxes.
The deadline for both completing and paying your self-assessment tax return each year is 31 January. A hefty tax bill can set you back at the best of times – but if your cashflow is affected by late payments or slower sales over Christmas, you may run into a bit of a problem.
That’s why you should get in early. The sooner you complete your tax return, the sooner you’ll know how much tax you owe. And if you’re self-employed, you’ll also find out what National Insurance contributions you’ll need to pay.
Once you have a good idea of your future outgoings, budgeting will be a lot more straightforward.
If your last self-assessment tax bill was more than £1,000, you will have to spread the cost of the following year’s tax due via payments on account. These are advance payments towards your next tax bill, paid in two instalments in January and July.
And if you’re worried about being able to pay your tax bill in full, HMRC offers payment plan options. If you think you’ll owe less than £30,000 in tax, you may be able to pay what you owe in instalments through time to pay.
To be eligible for this, you’ll need to file your tax return by 30 December and be within 60 days of the payment deadline. Paying in instalments rather than all at once can make all the difference to your business finances. But even if you don’t meet the right conditions for this plan, it still pays to get ahead.
If your business is VAT-registered, you’ll have to send a VAT return, usually on a quarterly basis.
VAT is due one month and 7 days after the quarter end (if filing quarterly returns) if paying by bank transfer. If a company chooses to pay by direct debit, payment is taken one month and 10 days after quarter end, or the next working day if the 10th day falls on a weekend.
But don’t panic – by keeping your records up to date, you can make sure you have cash put aside at the end of every month to pay your bill and will make filing your return a lot less stressful.
Plus, under Making Tax Digital rules, you’re legally required to keep records in a digital format and send VAT returns using software.
VAT schemes such as the flat rate scheme or cash accounting scheme can help simplify your VAT return as well as minimise the amount of VAT due each quarter. You can also reclaim VAT on business expenses or claim bad debt relief to reduce your tax bill.
Keep in mind that it is not always clear if VAT can be claimed or in some cases if there is even VAT included on the cost of a purchase! It’s a good idea to speak to an accountant to make sure you have all the information you need before submitting your return.
Limited companies have to pay 19% (increasing from April 2023) of their taxable profits in corporation tax at the end of each financial year. Your corporation tax timeline depends on your company year end.
If your company year end is May, for example, your financial year will run from 1 June to 31 May. Your payment deadline will be nine months and one day after the period ends.
That’s great if the timings work for your business, but if money is usually tight around your deadline date, you may struggle to budget. You can change your financial year to a more convenient date via Companies House, which will change the date corporation tax is due.
Getting a head start on payment can also help. Not only will this make forecasting easier, but HMRC will usually pay interest to companies who pay early.
Whether you make a profit or a loss can impact your cashflow, too. A large profit means a larger sum being paid to the taxman, while a loss may make you eligible for a corporation tax refund. Making regular financial forecasts can help you work out how exactly your company will be affected.
It’s hard to budget properly when you don’t know what you owe to the taxman, so the sooner you file your returns the better. By getting ahead of the game you can work out the damage early and avoid running out of cash before any deadlines.
You can also look at paying regular monthly payments towards future tax liabilities based on current forecasts or using previous years as a guide. This can help reduce the final payment to be made and manage cashflow more effectively during the year.
But navigating the tax timeline by yourself can be stressful, particularly if you have a lot of different deadlines to contend with. Check out our expert tax planning services to find out how we can help you tackle your tax bills.
Get in touch with our team today to discuss your taxes.