The world of accountancy and tax is run by deadlines, and whether these are payment deadlines or filing deadlines, one thing’s for sure: you don’t want to miss them. Usually, a deadline is preceded by extensive preparation and planning, so that all your ducks are nicely in a row when it comes around.
So, what if there was a deadline that you silently passed each year, without even realising it? Rather like passing the event horizon of a black hole, it’s the unnoticeable, unremarked point of no return.
Missing the most important deadline of all doesn’t result in a penalty notice from HMRC, but it will ultimately cost you far more than £100. This deadline is 5th April – the end of the tax year – and it’s fast approaching. (If you’re in need of some light reading, take a look at why the year-end actually falls on this date; it’s all to do with ancient calendars.)
But why is this deadline so important? The reason it’s often missed is that HMRC isn’t expecting anything from you when it comes around. There’s nothing to file and no payment due. This means that there’s no immediate sinking feeling when the deadline breezes past and you have to physically pay that penalty. However, because the tax system is so complicated, with payment of tax due so long after you made the profit, it’s very easy to dissociate missing this ‘deadline’ with the consequence: a large tax bill almost a year later.
Instead, the direct cause and effect isn’t obvious, and you don’t miss what you didn’t know you could have had – a far smaller bill. What’s the cause, though? The detailed answer for each person will always be different, but there’s one common denominator: inaction.
As UK taxpayers, we can access a number of allowances each year; how much you can put into your pension, how much you can earn before you start paying high rates of tax, how much cash you can gift to your children or grandchildren…the list goes on. And if you don’t use these allowances, you lose them. Even as an accountant, this doesn’t sound super-thrilling, but it begins to hit home when you consider that inaction here can easily cost you £10,000s in a tax year.
So, what can you do? Tax is complicated and can feel overwhelming, but thankfully, there’s relatively little that you personally have to take care of. It’s our job as accountants to weave all these allowances and thresholds together with your world and needs to get the best result for you. However, we can’t do this on our own; we need you to work with us.
Broadly speaking, there are just three main areas that you need to make sure you have covered:
- Engage with us – we want to have conversations with you, not just about your accounts, but what’s going on in your world and what your future plans are. This could help us harness opportunities that you didn’t even know you had.
- Take ownership of your figures – having recent numbers available at the click of a button is vital. We can’t give you any meaningful advice if we don’t have the facts to hand. This doesn’t mean that you have to spend every weekend making sure your bookkeeping is up-to-date, but someone should be handling it; whether this is your practice manager or us. Having good numbers and systems is crucial.
- Take action – with everything on your plate, it’s easy to let things that don’t have immediate and obvious consequences slide. However, since the introduction of the Criminal Finances Act 2017, backdating anything is a big no-no (not to mention illegal). This means that there are no second chances and action needs to be taken in real time. Whether this is squeezing in that tax-efficient dividend or buying a piece of equipment a month earlier in order to get the best tax rate, everything needs to be done in real time.
If you’re able to do the above, we promise to take care of the rest. We always get in touch to remind you that the tax year is coming to an end, so if you’re already a Hive client, you should be hearing from us soon. We also offer a free financial review of your figures so that we can make bespoke recommendations of the action you should take.
So, if you had a painful tax payment this January, we want to work with you now to ensure next year’s is better; but the time to act really is now. Get in touch with a member of our team if you’d like to get started.
