Small businesspeople operating their own, unincorporated businesses have until 31 January 2021 to file their 2019/20 personal tax returns, but they should file them as soon as possible.
There is a natural tendency to put off tax returns – even more so this year with Covid – but there are a number of advantages that can arise from finalising the returns as quickly as possible.
If you have overpaid tax for the 2019/20 tax year because of payments on account arising from your 2018/19 tax return submission, the quicker you do the tax return, the quicker you might be able to get a tax refund from the HM Revenue & Customs (HMRC).
Potentially more important, by filing the tax return now, you can potentially help ‘evidence’ any claims you may need to make for a Government grant under the Self Employed Income Support Scheme (SEISS).
The SEISS arrangement is available to businesses until March 2021, but in broad terms the self-employed are only formally allowed to claim the grant in future if their business has, in effect, suffered a “significant negative impact” because of the Covid-19 pandemic.
Pulling together the income and expenses as part of filing the 2019/20 tax return can help provide the self-employed with the information, they require to justify a SEISS claim, in the case of an HMRC audit of the grant application.
There may even be a benefit in filing the tax return promptly for those self-employed business people who have previously been “left behind” by the SEISS scheme and have received no funding – this would include anybody who set up their business in 2019/20 tax year.
By ensuring that their tax return is filed on a prompt basis, it is just possible that this will put additional pressure on the Government to provide some genuine support for such “left behinds”, who have often taken significant financial risks in setting up their own businesses and have, in many respects, been totally ignored by the Government in its formal response programmes. This pressure will only grow, as HMRC needs to extent the SEISS grants into the 2021/22 UK tax year.
Tax returns are not innately top of the agenda for most self-employed people, but by focusing the return now they may be putting themselves in the best possible position to benefit from additional Government support during the recession caused by the pandemic.