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Guide to the tax year for small businesses [2019/20]

By March 31, 2019 No Comments
Taxes and calculator

Taxes and calculatorThe end of the UK tax year is a great time to knuckle down and get your books organised – making sure all of your invoicing, expenses and banking are under control and ready for the start of the new financial year.

As such, we’ve put together a guide with everything you need to know about the tax year ahead for your business, starting with one of the most-asked tax questions we’ve had.

Why does the tax year start in April instead of January?

The tax year in the UK starts on the 6th April and lasts until the 5th April the following year. But why doesn’t it start and finish with the beginning and end of the calendar year instead?

Well, it’s because we switched calendars in the 18th century. Between 1155 and 1752, we followed the Julian calendar and our new year started on the 25th March.

However, as time went on, the Julian calendar slowly started to fall out of sync with the solar system. To solve the problem, Europe adopted the Gregorian calendar (the one we currently use) but this meant we were now out of sync with Europe.

In 1752, Britain decided to line up with Europe and follow the Gregorian calendar too. Because we were 11 days ahead, this meant we had to lose 11 days in September.

The Treasury were concerned about missing out on taxes so to make up for it, they extended the tax year by adding 11 days. This took the tax year to the 5th April, and it was later moved to the 6th in 1800 due to a leap year.

What are the key dates for the 2019/2020 financial year?

The dates you need to remember for the current tax year are:

6th April 2019

  • Start of the 2019/20 financial year

31st May 2019

  • Staff should be given their 2018/19 P60 certificates

6th July 2019

  • Deadline to file P11d forms and provide copies to employees

19th July 2019

  • Pay class 1A 2017-18 NIC on paper

22nd July 2019

  • Pay class 1A 2017-18 NIC online

31st July 2019

  • Deadline for second payment on account of 2018/19 tax year (self-employed)

1st October 2019

  • Corporation tax due for companies with a year end of 31 December 2018

5th October 2019

  • SA1 form deadline (for declaring income from property)
  • Deadline to tell HMRC if you’re self-employed (CWF1)

31st October 2019

  • Deadline for submitting self-assessment tax return on paper
  • Deadline for capital allowances claims for tools bought in the 2015/16 financial year (PAYE taxpayers)

31st January 2020

  • Deadline for self-assessment tax return online
  • Deadline for complete payment of 2018/19 tax bill

5th April 2020

  • Deadline to apply for PAYE tax rebate for 2015/16 financial year
  • End of the 2019/2020 financial year

What are the main UK business taxes?

Depending on the type and performance of your business, you may be subject to different taxes. Make you know what taxes you need to consider for your business and meet the deadlines to avoid any unpleasant fines from HMRC.

The main taxes small business owners like you need to know about are:

Income tax

You must pay income tax as a sole trader on the profits your business makes above the personal tax allowance.

If you run your business as a limited company, you’ll pay income tax on your salary or any dividends taken from the company.

Usually, income tax is collected via PAYE (pay as you earn) on a monthly basis and directly paid to HMRC.

Corporation tax

You only need to pay corporation tax if you run your business as a limited company. It’s self-assessed and worked out as a percentage according to the profit of the business or taxable income.

Corporation tax needs to be paid for nine months after your business’s accounting period.

VAT (value added tax)

Your business may need to charge VAT if you offer a service or product. In the UK, VAT is set at 20% across most products and services and you can register your business at any time for VAT.

If your annual turnover is more than £85,000, you must register your business for VAT by law. If your annual turnover falls below £83,000, you can “deregister” for VAT, which means you no longer have to pay it.

Your business can claim back VAT on products or services it needs once you have registered.

Business rates

You may need to pay business rates depending on your location and the nature of your company. If you operate your business in a dedicated office or space, you will usually have to pay these rates. However, there are many business tax relief grants and schemes you can apply for.

National Insurance

Your business must pay National Insurance if you employ staff. It’s paid to HMRC when you pay your staff’s salaries.

There are different classes of National Insurance depending on the type of business you run.

Will Brexit have any impact on tax?

Indirect taxes such as VAT, customs duty and excise duty are EU-based taxes, so it is likely these will be affected by Brexit more than direct taxes.

For any EU-based and regulated taxes, the UK will have to have their own taxation systems in place.

It could affect the current systems or cash flow, but we don’t yet know the outcome. We won’t know for sure what will happen to UK taxes until the negotiations have concluded.

Conclusion

Small business owners like you often have enough on your plate without having to sift through reams of jargon to understand what you owe HMRC. Hopefully this article has helped to define some of the most common taxes you’ll encounter.

Just remember – they may seem daunting but it’s vital you complete your taxes fully and in good time. The faster they’re done, the faster you can get back to managing your day-to-day and growing your business.

If you’re looking to grow your business and reach your goals but you need extra capital to do so, we’re here to help.

At Boost Capital, we’re champions of small business. Our loans are designed for small businesses and we can have the funds with you in as little as two business days.

That way, you can worry less about cash flow and focus on taking your business to the next level. Get in touch for an instant quote.

Bear in mind: This post is for general information only and isn’t meant to replace professional advice. Check with your accountant before you make any important decisions.

Dom Stapleton

Dom joined our marketing team last year. He has over 10 years of experience in SEO and social media, and also runs a (very) small business in his free time.

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Dom Stapleton

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