Many small businesses still face challenging times ahead. If you’re drawing up plans for the next few months, here are seven updates you can start planning for.
There’s no uncertainty about Self Assessment – every year, the self-employed need to complete a tax return and pay their tax bill.
The deadline is 31 January. So if you haven’t done yours yet, why not make a resolution to get it out of the way? Our guide explains more about how to complete your Self Assessment tax return.
This year is different in one important way, though. If you think you’ll struggle to pay your tax bill before the 31 January deadline, you can come to a Time to Pay arrangement with HMRC to settle your bill in instalments over the next 12 months.
Time to Pay isn’t a new service. But HMRC has relaxed the rules this year to make it easier to apply for an arrangement online, without needing to call.
You can use the service if you owe up to £30,000. If you owe more, you’ll have to ring HMRC. You need to file your return before the deadline to set up a plan.
If you can pay your bill though, you should, because the service is meant for those in financial difficulty. Interest will also be added to your balance from 1 February, making your bill more expensive.
Update: HMRC has also announced that it won't issue late payment penalties in February, meaning that if you don't think you can file before the deadline, you won't receive a fine. You still need to pay by 31 January, though. Read more.
In November, HMRC issued a press release reminding taxpayers to look out for scammers pretending to be from HMRC in the run up to 31 January.
Scammers take advantage of the increased communication from HMRC about Self Assessment, promising taxpayers ‘rebates’ or ‘refunds’ to get them to hand over their personal and financial information.
In the last 12 months, the public has reported more than 846,000 instances of suspicious contact to HMRC. Almost 500,000 of those offered bogus tax rebates.
HMRC says that communication you receive could be a scam if it:
You can also remember to ‘stop, challenge and protect’:
Remember you can check your tax information by logging in to your personal tax account, where you can also safely claim a rebate if you’re owed one.
The Brexit transition period ends on 31 December. This means that from 1 January 2021, there are new rules to follow if you’re:
The government has a tool you can use to check what actions you need to take.
The tool is part of the government’s campaign ‘The UK’s new start: let’s get going’, which aims to make sure that businesses and individuals are ready for Brexit and can “seize the opportunities that it will bring”.
So it’s not just about preparing for changes – it’s about identifying opportunities for businesses too, whether through new free trade agreements or updates to regulation.
The Chancellor, Rishi Sunak, delivered a spending review at the end of November, in which he outlined his plans to prioritise jobs, businesses and public services.
The Treasury has also confirmed that there’ll be a full Budget announcement in March. That’s because there needs to be a Budget each financial year – the one planned for the autumn was cancelled in favour of the Winter Economic Plan and a spending review.
The annual Budget is where the government outlines its revenues and spending and its plans for the future.
The Treasury’s permanent secretary, Tom Scholar, said that by spring, “the chancellor will be setting out the economic strategy that will support the economy as it moves out of the pandemic”.
Update: Rishi Sunak has set the date for the next UK Budget – 3 March. We'll keep you updated with more information as we hear it.
If your business is being significantly impacted by coronavirus and is suffering from reduced profits, you might still be able to access the third and fourth Self-employment Income Support Scheme (SEISS) payments.
You need to have been eligible for the previous SEISS grants, although you don’t need to have actually claimed them.
The third SEISS grant payment covers November to January and is available until 29 January 2021. It’s worth 80 per cent of your average monthly trading profits, up to a £7,500 cap.
The fourth – and final – payment covers February to April, but there aren’t any details about the level it’ll be set at, or when you can apply.
But SEISS doesn’t help if you were previously excluded from support – for example if you’re newly self-employed, a limited company director, or earn more than £50,000. The campaign group Excluded UK estimates that three million people have been shut out of support.
Other support schemes like the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) could help and have been extended until 31 January 2021, but these are loans rather than grants. Update: businesses now have until the end of March to apply for the CBILS and BBLS.
The government delayed introducing new off-payroll working (IR35) rules in the private sector by a year because of coronavirus. The rules will (finally) be introduced in April 2021.
IR35 refers to the rules that HMRC uses to work out whether a contractor is genuinely self-employed for the purposes of paying tax.
HMRC doesn’t want contractors who are essentially employees to enjoy the same tax efficiency as those who are genuinely self-employed. The tax authority also doesn’t want employers enjoying the advantage of not paying employers’ National Insurance contributions or giving contractors employee benefits.
The April 2021 change means that medium-sized and larger businesses who employ contractors will now be responsible for working out a contractor’s employment status, rather than the contractor themselves. They’ll also be responsible if they get the decision wrong, which could lead to penalties for the business.
These changes are controversial. When the same reform was introduced in the public sector in 2017, it led to businesses taking a ‘blanket’ risk-free approach – choosing not to engage contractors at all. The same thing happened in the months leading up to the originally scheduled private sector change.
Many believe the updates could hinder the flexibility of the self-employed, precisely when the economy needs such specialists and risk takers.
But as the chances of any more delays are extremely slim, both self-employed contractors and the businesses that hire them should start preparing for the changes now, if they haven’t already.
Making Tax Digital is HMRC’s push to bring the tax system completely online. HMRC explains that “the heart of that vision is a fully digital tax system that works closer to real time, allowing people and businesses to pay the right tax with ease as they live their lives and go about their business.”
The initiative is being introduced in phases. Making Tax Digital for VAT is already in force and HMRC expects to roll out Making Tax Digital for Self Assessment in April 2023.
HMRC is also currently running a consultation on introducing Making Tax Digital for corporation tax. The consultation is open until 5 March 2021 and HMRC is looking for views from companies that pay corporation tax, as well as agents, professional bodies and software developers.
It’s also running virtual consultation events by sector. You can join one of these if you’re going to be affected by Making Tax Digital for corporation tax and want to get involved. Find out more about the consultation at gov.uk.
What are your plans for your business in 2021? Let us know in the comments below.
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