You may have heard the term ‘tax year’ used before, but what exactly is it, and how does it affect you as a Network Marketer?
Well, the date is important because it has an impact on how you manage and organise the financial affairs and accounts for your Network Marketing business. If you are self-employed, it is important because the end of the tax year is the cut off point for the financial information that HMRC requires for your self-assessment tax return – and it may therefore have an impact on important business decisions such as big purchases.
What is the Tax Year?
In the UK, the tax year runs from 6th April to 5th April of the following year – in fact, it has done since 1752 when the UK adopted the Gregorian calendar for tax purposes. As of 6th April 2021, we are now in the tax year 2021/2022.
How does it affect business owners?
Anyone who is self-employed will need to file their self-assessment tax return for the 2020/2021 tax year by 31st January 2022. In practice, this means that all business finances, such as expenses, receipts and statements will need to be sorted and filed according to tax years. Any changes in tax are likely to come into effect from the start of a new tax year so it’s important to look out for official budgets and statements announced by the Treasury.
Here are some things to consider in the new tax year
- Start putting money away for your 2022 tax bill. It may feel like you’ve only just paid your tax bill for the last tax year but getting into a regular savings routine by starting to put money away every month to pay for next year’s tax bill is something we strongly encourage our clients to do.
- Consider digitising your accounts. There are a number of digital accounting systems available to help you access and manage your accounts from wherever and whenever you need to. These will also help remind you of important dates and will make it easier for you to submit your accounts when the time comes. Well-known accounting software such as Xero, Sage or Quickbooks are all popular choices for the self-employed, or PRBookkeeping is our own bespoke software developed for the Network Marketing sector.
- Speak to your accountant about tax planning opportunities. Depending on your circumstances, it may be possible to save or delay tax by deferring income and advancing expenditure from one accounting period to another. Following the spring budget, here are some more details on personal tax planning for the 2021/22 tax year.
- Consider tax-efficient investments that will reduce your overall tax bill. These are government reliefs that – depending on your circumstances – might help to lower your overall tax liability. They include pension contributions, Enterprise Investment Schemes (EIS) or Venture Capital Trusts, but these can be complicated so please do speak to your accountant or us.