Tax year for the self-employed

Why the tax year end matters if you’re self-employed

Hear from Brian Byrnes, Head of Personal Finance at Moneybox.

Tax year end can be a confusing time of year. Why is it important? Why is it on 5th April? What do I need to do? Adding in the additional layer of complexity that can come from being self-employed can make it very easy to try and ignore the tax season.

But there are plenty of opportunities for those who are self-employed to be tax efficient and lower next year’s tax bill – so it’s worth taking the time to figure out how the tax year end deadline impacts you and your business. 

It will come as no surprise to anyone that’s set up their own business that the onus rests on you when it comes to tax planning. As with setting up your own pension, when you leave salaried employment you also leave the environment where these things happen automatically for you, or are arranged by your HR department. 

While there is an extra layer of admin involved, many of the same tax advantages apply in self-employment as for salaried employment. Pensions are still tax beneficial, ISAs still protect you from tax on gains and interest, and the government still tops up your LISA contributions. Read on to learn how these apply to you. 

Tax treatment depends on individual circumstances and is subject to change.

 

Self-employed tax year checklist 

Maximise your tax-free allowances

Even if you’re self-employed, the deadline for maximising contributions into a Lifetime ISA, Stocks & Shares ISA or SIPP is the same as everyone else. That means you have until 5th April 2023 to get the most out of your tax-free allowances before they reset. 

So before the 2022/23 tax year ends, you should look at whether you’ve put everything you can into a tax-wrapped account before your allowance resets. Not only will this help to preserve your allowance next year, but it means that you won’t be paying tax on things like capital gains or interest payments on your savings and investments.

 

Let’s go

 

And, every £100 you deposit into a Moneybox Lifetime ISA, Stocks & Shares ISA or SIPP before midday on 5th April automatically gets you one entry into our end of tax year prize draw – where the grand prize is £20,000. Why not secure some entries today? T&Cs apply.

 

Enter now

 

All investing should be long term (min. 5 years). The value of your investments can go up and down, and you may get back less than you invest. 

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.

 

Take care of your pension contributions

Being self-employed means that when it comes to your pension, you’re in total control. But for most self-employed people your pension is an allowable business expense – which can help to reduce your corporation tax bill.

It’s one of the most tax-efficient ways to save money – and you should really be making the most of it if you’re self-employed. But, you should talk to an accountant first before making a pension contribution from your business – just to make sure that it’s the best thing for you.

Check out the Moneybox Pension if you haven’t already, and see how our team of detectives can help you locate your lost pensions and bring them all into one easy-to-manage pot. Or, if you have a Moneybox Pension already, make sure you’ve maximised your deposits before your allowance resets.

As with all investing, the value of your pension can go up and down, and you may get back less than you invest.

 

Check it out

 

Just make sure you compare the charges, investment options and benefits between Moneybox and your old provider before transferring. We also can’t accept a transfer from a pension that your current employer is paying into.

And remember, you can also use a Lifetime ISA for retirement – not just a first house purchase. A Lifetime ISA is a good option for your pension if you’re self-employed because you’ll get the 25% government bonus on everything you deposit – up to a maximum bonus of £1,000 a year if you deposit the full £4,000 annual Lifetime ISA allowance. 

Plus, you won’t be forgoing any employer pension contributions. Why not open a Lifetime ISA today? 

 

Open a Lifetime ISA

 

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.

 

Make the most of your dividend allowance 

The dividend allowance is coming down after the 2022/23 tax year – first to £1,000 in 2023/24 and then to £500 in 2024/25. So if you pay yourself via dividends from your company, your tax bill is likely to rise. It’s a good time to check with your accountant and see if you are being as tax efficient as possible in the way you pay yourself. 

The cut in the dividend allowance will have less of an impact on dividends received from investments, if they are held in a Stocks & Shares ISA. That’s because you won’t pay any tax on any income you make from dividends – regardless of your annual dividend allowance – and you won’t pay capital gains tax either. If you’re investing without a Stocks & Shares ISA, why not open one today to start making the most of tax-free gains. 

 

Open an ISA

 

All investing should be long term (min. 5 years). The value of your investments can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and is subject to change.

 

Get in early

Submit your tax return early – your self assessment tax return for the 2022/23 tax year can be submitted from 6th April 2023 onwards. Submitting earlier means that if you’re due a rebate, you’ll receive it sooner – plus you’ll be able to claim back all your allowable expenses, with more time to review everything properly and reduce the risk of mistakes.

And by returning your self assessment form sooner in the new tax year, you’ll be giving your accountant more time to look things over or to chat to them about anything that doesn’t seem quite right to you. 

 

Run everything by your accountant 

As a final step, you should run everything – including your pension and self assessment form – past your accountant to make sure it’s all as it should be. Self assessment tax forms are second nature to a lot of accountants, but doing your research and getting a good one is really important. 

Even if you think that you’ve done everything correctly, it always pays to get an accountant involved when it comes to submitting your self assessment form. And if you’re self-employed, hopefully you have one already. We’ve included the key dates for submitting things like your self assessment form below. 

 

2022/23 self-employed tax year dates

Here’s when you need to have everything finished for the 2022/23 tax year so you’re not caught out. Remember, you can submit your self assessment tax return for 2022/23 as early as 6th April 2023 – which is when the 2023/24 tax year starts.