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What Is A Tax Year & Using It To Reduce Your Tax Bill

blmurch via Flickr

A tax year is the period of time when you are assessed for tax.

What Are The Tax Year Dates?

The first day of the UK tax year is 6th April.

The last day is 5th April the following year.

Sole traders are assessed for tax through the self assessment tax return system. Your sole trader accounting year is not the same thing as the tax year, although the dates are usually the same (yes, you have an accounting year too!)

Limited companies are taxed differently so be aware of that if you have a new company. If you aren’t sure if you’re limited company or sole trader, find out here. Directors of limited companies usually also need to complete a self assessment tax return.

The Tax Year For Sole Traders

HMRC assess sole traders for tax through the self assessment system.

In the UK we have a generous deadline of 10 months after the end of the tax year to get our returns in (Americans have only 3 1/2 months!)

Most sole traders have their accounting year the same as the tax year. This makes doing your accounts and self assessment tax return a lot easier.

[Tweet “Make your accounting year the same as the tax year to make your life easy”]

On your self assessment, enter 5th April of the relevant tax year as your accounting year on the self employment pages (e.g. 5/4/14 for the 2013-14 tax year).

Simple.

What To Do When You’re A New Business

Julia has a full time job and begins freelancing in the evenings and at weekends.

She registers as self-employed with HMRC and starts trading on 11 February. (Trading is when you are looking for clients and not whether you have any clients or been paid)

She wants to make her tax return easy.

When Julia does her first self assessment, she uses the Tax Return Toolkit and Tax Return Support to help her. She chooses to have her accounting year end on 5th April.

Julia made a loss because she had lots of tax-deductible expenses to start her freelancing and didn’t have a lot of client income.

She’s able to get a tax refund and is pleasantly surprised how easy it was (the cake and wine helped too 🙂

Using Tax Year Planning To Reduce Your Tax Bill

[Tweet “Good planning before the beginning of April can reduce your tax bill or get you a refund”]

If you’re interested, let’s have a chat. Especially if you’re a new business or freelancer, or intend to purchase big ticket items like a new laptop 🙂

The Tax Year For Directors Of Limited Companies

Most directors of limited companies need to do a self assessment.

The tax year is the same for sole traders, 6th April to 5th April the following year. It isn’t how your company is taxed so yet another date to remember unfortunately.

Your accountant can do your self assessment for you or you can do it yourself. It’s easy enough for most directors of one man band limited companies. Grab yourself a Tax Return Toolkit and a piece of cake and get it out of the way.

 

Key tax year dates:

  • March – Ask how you could save tax if you’re a new business, making a loss or intending to buy big ticket items
  • 6th April – First day of the new tax year
  • 5th April following year – Last day of the tax year
  • 31st January year after that – Deadline for filing self assessment and paying tax

 

Do you use tax year planning to reduce your tax bill?

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