Now that the tax year has closed, it’s a perfect time to reflect and plan with renewed clarity. At TBLA, we remain dedicated to being caring, professional, and progressive, ensuring that each tax season is not only about compliance but about fostering financial and personal well-being and growth. Taking a proactive approach to your self-assessment brings many benefits:
Tax Planning Opportunities:
1. Payments on Account for the Year Just Ended
Payments on account for tax liabilities over £1,000 are based on your previous year’s liability. Depending on the circumstances, you may find that these payments on account no longer align with your actual liability.
Action Tip: Review your tax position at the end of the tax year to assess whether adjustments to your July payment on account are needed. For example, suppose you’ve had a decrease in income or have incurred more expenses. In that case, you might be able to reduce your payments on account.
2. Forward-Looking Tax Planning for the Year Ahead
Once you’ve reviewed your payments on account and made any necessary adjustments, you can begin planning for the year ahead. Understanding potential changes in income, new tax reliefs, or other financial milestones can help you anticipate your tax position and avoid surprises.
Action Tip: Start forecasting your income, capital gains, and allowable expenses for the upcoming year. For example, suppose you expect higher earnings or are planning a large investment. In that case, it’s essential to consider the tax implications early. Identify areas where you can make tax-deductible contributions, like pension contributions or charitable donations.
3. Making Use of Tax Reliefs and Allowances
The start of a new tax year is a great time to investigate any available tax reliefs or allowances that you may not have used in the past. These may include the annual investment allowance, marriage allowance or capital gains tax exemptions. By planning, you can take advantage of these reliefs and minimise your tax burden.
Action Tip: Review the latest tax legislation and reliefs available for the new tax year, or speak to your account manager about anything you think you may be entitled to. For example, suppose you have income below the threshold for the full personal allowance. In that case, you might be able to transfer it to a spouse or civil partner using the marriage allowance.
Financial Review: Ensuring All Income and Allowable Expenses Are Being Claimed
A thorough financial review at the end of the tax year is essential for ensuring that your financial records are complete and accurate. This provides an opportunity to assess whether all income, expenses, and tax allowances have been adequately accounted for, helping you avoid overpaying tax and ensuring you’re taking full advantage of available tax reliefs. Here’s how you can approach this financial review:
1. Review of Income
Ensure all income has been accurately recorded and reported. This includes any salary, self employment income, rental income, dividends, interest, or capital gains. Even if some income has tax deducted at source, we still need to know about it!
Action Tip: Review your bank statements, invoices and payslips to ensure you’ve captured all sources of income, especially if an employment ceased early in the tax year. Don’t forget to account for income from investments, savings, etc., that may not be immediately apparent.
2. Review of Expenses
One of the most effective ways to reduce your tax liability is by claiming all allowable business expenses. If you’re self employed, you can deduct expenses related to the operation of your business, such as office supplies, travel, software subscriptions, or professional fees.
Action Tip: Check your receipts, bank statements, and credit card records for any missed expenses and consider any other expenses that may be eligible for deductions, such as home office costs or phone bills used for business purposes.
Avoid Penalties: The Importance of Timely Filing and Payments for Self-Assessments
Filing your self-assessment tax return and making payments on time is essential for avoiding penalties and maintaining a smooth financial year. While it may seem like a simple task, missing deadlines or failing to pay can result in costly and easily avoidable penalties. Here’s why meeting deadlines and paying on time is crucial, as well as avoiding penalties by staying organised with your self-assessment obligations.
1. Late Filing Penalties
If you miss the deadline for submitting your self-assessment tax return (31st January following the end of the tax year), HMRC will charge an automatic £100 penalty, even if you have no tax to pay or you’ve already paid what’s due.
Additional Penalties for Late Filing:
- 3 months late: An additional £10 penalty per day, up to a maximum of £900.
- 6 months late: A further penalty of 5% of your tax due or £300 (whichever is greater).
- 12 months late: An additional penalty of 5% of the tax due.
This escalates quickly, and penalties can add up over time, creating unnecessary stress and financial strain. By filing on time, you avoid these extra costs and the stress that comes with them.
Action Tip: Set reminders well in advance of the filing deadline. Mark the date on your calendar and consider using digital tools or calendar apps to alert you about important dates.
2. Late Payment Penalties
Just like filing your return on time, making your payment by the due date (31st January for liabilities and first payments on account and 31st July for second payments on account) is essential for avoiding late payment penalties.
If you don’t pay your tax bill by the due date, you will face penalties and interest charges:
- Late payment (30 days): HMRC will charge 5% of the unpaid tax.
- Late payment (6 months): Another 5% of the tax due will be added.
- Late payment (12 months): An additional 5% penalty will be applied.
Even if you’re not penalised yet for being late, HMRC will charge interest on any unpaid tax from the due date (31st January) until the date the tax is paid. This interest rate is usually aligned with the Bank of England base rate, so it can fluctuate, but it’s typically quite significant.
Action Tip: Set aside 20% of income when received for your self-assessment payment. It can be easy to forget about payments when other financial priorities arise, but preparation is key. If you’re unsure you can pay your tax bill on time, contact HMRC before the deadline to explore payment arrangements or options for deferral. In some cases, they can offer a time-to-pay agreement that could prevent penalties.
Peace of Mind: Get One Thing Off Your Plate to Continue with Clarity and Less Stress
Handling your self-assessment taxes ahead of time can provide you with a significant sense of relief and peace of mind. Often, the stress of looming deadlines and unresolved finances can carry over into other areas of your life, affecting your focus, productivity, and overall well-being. You can clear one major task off your to-do list by tackling your self-assessment tax return early. Here’s why addressing your tax obligations sooner rather than later can set you up for a much smoother transition into the new financial year.
1. Reduced Last-Minute Pressure and Stress
One of the biggest causes of stress during the tax season is the constant pressure of approaching deadlines. Waiting until the last minute to complete your self-assessment or pay your tax bill can result in anxiety, frustration, and even mistakes due to rushing.
2. Improved Work-Life Balance
Completing your self-assessment earlier frees up time to focus on other aspects of your life and business. Rather than letting the stress of tax consume your time and energy, you can shift your attention to personal or professional interests. This improved work-life balance can result in greater satisfaction, productivity, and well-being.
3. Better Cash Flow Management
Completing your self-assessment early gives you a better understanding of your tax liability. It can help you plan your cash flow more effectively. If you owe taxes or need to make payments on account, getting this sorted early will give you time to arrange for funds, avoid interest charges or adjust your budget to accommodate any payments.
4. Increased Confidence and Control
Filing your self-assessment early gives a sense of control over your financial situation. By proactively addressing your tax obligations, you send a message to yourself that you’re on top of things and taking steps to manage your finances. This sense of control leads to greater confidence, which positively affects you, both personally and professionally.
Action Tip: Start early so you have plenty of time to gather all necessary documents, seek advice, and ensure everything is correct.
Success is a journey we share with our partners, built on collaboration and mutual learning. Past self assessment seasons have highlighted key areas where we can better support you—because we thrive when you thrive.
Key Lessons for a Smoother Tax Process
- Respond to your accountant promptly – Clear and timely communication helps us serve you efficiently and with care, making the entire process seamless.
- Provide all requested documentation – The sooner we receive your documents, the sooner we can ensure accuracy and avoid last-minute stress.
- Ask for help if you’re stuck – We’re here to support you. Whether you need guidance, clarity, or reassurance, we’re just a conversation away.
Leah began her career as a trainee accounts assistant in September 2015, completing the AAT qualifications in January 2019. She joined TBLA in August 2019 taking on responsibility for company accounts, Self Assessments, VAT returns, and payroll. After the birth of her twins she took a short break from studying, and is now studying on the Level 7 apprenticeship scheme aiming to qualify under the ICAEW.
