Important Tax Milestones in Your First Year as a Small Business Owner

Your first year as the owner of a limited company can seem like a whirlwind of accountancy-related deadlines. There are dates to remember for filing your year-end accounts, your self-assessment tax return, your VAT returns…and a host of different dates for making payment of your various taxes.

 

Tax ReturnMilestone 1Milestone 2
Annual AccountsSubmit annual accounts to
Companies House and HMRC
Pay corporation tax to HMRC
Self-Assessment Tax ReturnFile your tax returnPay your tax
VAT ReturnsSubmit your VAT returnsPay your VAT

MILESTONE 1: Your company’s annual accounts

It will be necessary to prepare annual accounts for Companies House and a tax return for HMRC every year. Your company’s accounting period begins on the date your company was registered with Companies House. Your first set of annual accounts must be submitted to Companies House 21 months after your incorporation date. For HMRC, your accounts must be paid no later than nine months and one day after your accounting period ends.

Example:

Let’s say your company is registered with Companies House on January 1st 2019. Your year-end will be December 31st 2019. You will have until September 30th 2022 to submit your annual accounts to Companies House (21 months after incorporation) but your Corporation Tax would need to be paid to HMRC by 1st October 2020.

MILESTONE 2: Your Self-Assessment Tax Return

As a director of a limited company, it’s likely that you will receive your income as a mixture of salary and dividends. Most people will take a minimal salary to ensure National Insurance contributions are maintained, with dividends making up the rest of their income. Dividends are subject to dividend tax which you can pay via a self-assessment tax return.

Tax returns must be submitted to HMRC by January 31st. They relate to income you receive the previous tax year, so the forthcoming 31st January 2020 deadline will relate to income received (6th April 2018 – 5th April 2019).

Self Assessment Milestones

If this is your first year running a limited company then your self-assessment period will probably cover only a part of the year, especially if you were previously employed and paid tax via PAYE.

We will work with you to help you prepare your self-assessment tax return. It will need to detail the dividends you took from your company (and any salary over the tax-free allowance) as well as any income from other sources such as interest on investments, income from a rental property, etc.

Importantly, you don’t need to wait until the deadline of January 31st to submit your tax return and pay any outstanding tax – you can do so at any time after the tax year has ended (ie any time after April 6th). If you are late in making payment, HMRC impose penalties.

Learn how to prepare your tax return with our 2020 Self-Assessment guide

Most people will take a minimal salary to ensure National Insurance contributions are maintained, with dividends making up the rest of their income. Dividends are subject to dividend tax which you can pay via a self-assessment tax return.

VAT Returns

If your business is registered for VAT you must charge your clients VAT with each invoice. Your VAT return will then need to be completed and typically paid on a quarterly basis.

The deadline for paying your VAT is one calendar month and seven days after the end of the VAT period. For example, if your VAT period ends on 31st March, your return must be submitted, and payment made to HMRC, by 7th May.

Again, it’s a good idea to set aside your VAT in a separate business savings account as soon as you receive payment from clients, so that it is available when you need to pay it.

We’re here to help you stay in control of your finances!

Our team accountants will guide you every step of the way, making sure all the relevant documentation is submitted to the right place at the right time. We are here to help you understand and prepare for all of your accounting milestones and let you know in advance that a deadline is approaching, while working with you to complete the relevant documentation and make the correct payments on time so that you don’t incur penalties.

Online Accounting System

Our online bookkeeping software makes it super-easy to keep your business finances up-to-date, and this makes it far easier to submit the correct paperwork at the right time. Also, our online accountancy software makes it easy to see what you need to set aside for corporation tax, dividend tax, and VAT, so you have the money available to pay when it’s due.

Don’t forget, though, that if you have any questions or need help at any time, our team of dedicated small business accountants we are just a phone call away.

Posted by Editorial