Why you should get the Accounts done early
If you are self employed you will know that your Self-Assessment tax and NIC payments on account are based on profits earned in the previous tax year and balancing payments due are not payable until the 31 January following the tax year end date.
From a cash flow point of view this is an advantage but only if taxable profits year on year are increasing.
During this unsettled period due to COVID-19 disruption, many self-employed businesses will have lower profits in 2019-20 compared to 2018-19, and potentially even lower numbers in 2020-21 compared with 2019-20.
For these two years in particular ie 2019-20 and 2020-21 I would suggest that I prepare and submit your Accounts and Tax Return as soon as possible after the end of the tax year.
Why do I recommend this?
- If profits have fallen, year on year, I can apply for payments on account (payable January and July each year) to be reduced.
- You will be advised of any balancing tax payments due for the previous tax year, due the following January, well in advance of the payment date, so you have time to budget for these payments.
Besides that there is another advantage to preparing accounts and tax calculations as quickly as is possible after the end of the tax year. If you need to apply for one of the recently announced Coronavirus Business Interruption Loans or indeed any commercial loan, the lender will probably require to see up to date Accounts and this will help you draw up a cashflow forecast should you need one.
And if that wasn’t enough just think of the feeling you will have knowing that it is all done and out of the way !