Tax
Sole traders, partners and self-employed individuals
The end of the financial year means that if you’re a sole trader, partner in a business or otherwise self-employed, you can file your tax return for 2023/24.
It may seem earlier than necessary – after all, the deadline for online submissions isn’t until 31 January 2025. But we all know that there’s never a spare moment for an entrepreneur, so getting your ducks in a row as early as possible just makes sense to fulfil your responsibilities stress-free.
To get prepared, unearth all of your invoices, receipts, bank statements and other business paperwork from the last 12 months and collate it into an order that makes sense. This could be in date order, matching up invoices with payment receipts, or any other way – what’s important is that you know where to find them.
You will need to declare your total income and expenses for the year, so your next step is to calculate these figures. Remember: you can’t claim expenses if you’re using your £1,000 tax-free allowance, so calculating your expenses will let you know which is the more tax-efficient option.
After that, simply follow the steps to complete your return online. Once your return is submitted, keep your paperwork for five years, since HMRC can ask for evidence at any point during that time.
Limited companies
If you’re a limited company, chances are you have an accountant who handles your accounts and reporting for you – but that doesn’t mean you’re responsibility-free when the financial year ends.
For example, your accountant will likely prepare your Company Tax Return – but it’s your responsibility to pay your corporation tax. Confusingly, the deadline for paying your tax bill comes before the deadline for filing your return, so making sure your return is completed early is essential for paying your tax on time.
And don’t forget to dedicate time to reviewing your Statutory Accounts once your accountant has prepared them – they offer valuable insight into your overall business performance and financial position.
The end of the tax year is also typically when VAT bills land, so look out for the action you need to take – either paying your tax, or reclaiming overpayments you’ve made throughout the year.
Payments
Getting any payments in before the close of your accounting period isn’t completely essential, but it does make things much cleaner since you’re not carrying anything over, affecting the following year’s profits. So if you’ve got any outstanding expenses, for example, or have been pondering giving your employees a bonus, try to get them wrapped up before year-end.
Similarly, the month leading up to year-end is the time to step up your efforts with chasing unpaid invoices, to ensure the profit margins in your accounts accurately reflect your annual performance.
For limited companies, dividends are taken from ‘distributable profits’ – the amount that’s left once you’ve paid corporation tax and other responsibilities – and retained some profit to reinvest in the business and build cash reserves. Given that dividends are typically declared annually, it makes sense to do this soon after filing your reports and paying your corporation tax.
Review company expenditure
Optimising how much your business spends is a valuable way to protect your profit margins, without compromising on offering quality or needing to put prices up.
Comparing prices for expenses like bills, supplies and insurance can be time-consuming, and many business owners are put off by the thought of changing providers, even if there are savings to be uncovered. But providers tend to rely on customers having this attitude to continue charging above the odds, and the temporary upheaval could be worth a lot of money over the coming year.
If you’ve managed to free up some profit margin by finding cheaper deals, or you find your business in a strong position, year-end is also a great time to think about salary reviews. A pay rise in line with inflation (or more if you can afford it) is the most valuable way to reward your employees’ hard work, and will be very welcome amidst the current financial climate.
Prepare for next year
Of course, the end of the financial year also means the beginning of the new one, and while you’re getting on top of business admin it’s a good time to get prepared.
The change to National Insurance announced in the Chancellor’s Spring Budget comes into force in April, so if you’re an employer, you’ll need to ensure your first payroll of the new tax year reflects this.
Self-employed workers have had to wait until April for the cut that came into force in January, so will now benefit from two cuts at once. The rate on Class 4 NICs will drop from 9% to 6% on earnings between £12,570 and £50,270, and there will be no more paying Class 2 NICs.
Another change from the Budget will be the increase in the VAT threshold. Businesses turning over less than £90,000 now don’t have to pay VAT, and in some cases may be able to de-register, so while you’re reviewing your accounts it’s a good time to ask your accountant which might be the best option for your business.
With so much to do before the financial year ends, it’s a valuable time to access support from other business owners. You can browse our forums to see what other members are discussing, or post a question to hear others’ advice and experiences.