31 January 2022 Self Assessment Tax deadlines
Posted on 7th December 2021
When you become self-employed you must register to make a Self Assessment Tax (SAT) return and you must pay your annual income tax by midnight on 31 January after the end of your first tax year on 5 April. This is helpful when you first start your business, but it can cause problems later if you lose track of how much tax you must pay each year. Here’s how it works.
Your first Self Assessment Tax payment
If you have previously been employed your tax will have been calculated for you and deducted at source on a Pay as You Earn (PAYE) basis.
When you become self-employed you will be responsible for your SAT return and for paying your first tax bill by 31 January.
For example, if you started your business on 6 October 2020, your first tax year ended on 5 April 2021.
You have until 31 January 2022 to make your SAT return online, and you must also make your tax payment for your earnings, including your self-employed income, in the 2020/21 tax year on the same date which is understandably confusing.
You should also be aware of something.
If you were employed between 6 April 2020 and 5 October 2020, your income for that period will be taken in to account in your first SAT return, even though you made PAYE tax contributions.
If you don’t submit your SAT return before 31 January 2022 HM Revenues and Customs (HMRC) will assume you have continued to earn the same amount and base your first tax payment as a self-employed person due on 31 January on your employed income.
If you have earned significantly less as a newly self-employed person you could be facing a larger tax bill than you expected. If you have earned significantly more than your previous income from employment – congratulations. However, you will still need to make a balancing payment in January 2023.
Self Assessment Tax for company directors
If you are a director of your own company, you will normally still have to make a SAT return, even if you pay yourself a salary and any tax due is deducted as PAYE.
You will use your SAT return to declare other income you receive through dividends from your company and any other sources, such as rented property, for example.
Payment on account
make payments on account for the coming tax year.
Normally, if your Self Assessment Tax bill is more than £1,000, you will need to make payments on account.
This means that, in addition to your 2020/21 tax bill payable by midnight on 31 January 2022, you will also pay half of your total expected bill for the 2021/22 tax year at the same time, based on your 2020/21 income.
The other half of the 2021/22 tax will normally be due on 31 July 2022.
These payments on account include Class 4 National Insurance Contributions (NICs) where necessary.
If you earn more than expected you will make a balancing payment the following January, along with your first payment on account for the next tax year.
Complete your SAT return as soon as you can
The best way to keep track of the amount of money you will need to put by for your tax payments each year is to complete your SAT return as soon as possible after the end of the tax year on 5 April.
When you work with a professional bookkeeper you will know whether a balancing payment will be needed the following January and you can keep up to date with reports on your monthly or quarterly income. If you know that you won’t earn as much as the previous year, you can then ask for a reduction to your payments on account for the coming tax year.
If you would like to discuss your SAT return please get in touch.
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