Mike Parkes, Technical Director at GoSimpleTax, provides some expert insight.
As the saying goes, only two things are certain in life: death and taxes. And it’s fast approaching the time of year when tradies need to down tools and put their brain power into their tax return.
This year’s self-assessment will have an added element for many self-employed people, as it’s the first time the COVID-19 relief SEISS grants will need to be included. Anyone who received these emergency grants now needs to declare them and be ready to pay tax on the income.
Last year, my company surveyed over 500 self-employed people in the UK and found that the most pressing want was the simplification of taxes. Unfortunately, the Budget did little to alter the facts of taxation, so it remains up to the individual to ensure that they do all they can to make their tax returns easy to manage.
Every year, we see a surge of people filing their return right up until midnight on 31 January – the final deadline for annual returns. So, what can heating and plumbing professionals do now to make this year’s tax return pain-free?
The devil’s in the detail
It’s important that your return shows your taxable profit accurately. That makes it vital that you go through the detail of the year carefully to uncover any discrepancies and note any tax-deductible spending, as these may have a considerable impact on the amount payable.
Look at the deductibles
There are lots of tax-free elements to running a business. Phone bills, materials, marketing expenditure etc. can all be part of your tax-free expenditure. Look at all your outgoings and establish what falls into this bracket.
Harness online software
If you aren’t already using digital solutions for your invoicing and expenditure, it’s time to give it some serious consideration. There’s plenty of digital software that makes running your business much easier – and tax tools like ours integrate with many invoicing software options to automatically import your transactions, making your return that bit easier.
Tick the right boxes
This year, you’ll need to include SEISS grants. The biggest risk is not classifying them in the right way, which might actually lead to you overpaying on your tax bill. When completing your 2020/21 tax return, any SEISS grants received in the year ended 5 April 2021 need to be included. However, do not include the grants within your normal turnover figure. HMRC have added a specific box to the 2020/21 tax return for you to add details of any grants received, please be sure to include the grants in this box. If you were to include the grant within your normal turnover figure and leave the new box blank then it is likely HMRC will add your SEISS grants automatically, meaning the grant income is included twice, the result is you will pay tax on the same income twice.
It pays to be organised
Not only do you save yourself time and stress, but you can operate your business with a clear idea of how much profit you’ll have after tax – thus avoiding any nasty surprises.