The UK’s freelance population has suffered knocks in recent years but remains healthy – with over 4.2 million freelancers operating as of May 2022. Many of these are new to running their own business, and, as such, new to the responsibilities they have in relation to tax. Here is a brief guide to the tax year, and what your obligations are as a self-employed worker.
What is the UK Tax Year?
The UK tax year, also known as the ‘financial year’ to businesses, describes a twelve-month period that starts on the 6th of April and ends on the 5th of April of the following year. The unusual timing of the tax year in the UK is a quirk of history; prior to the UK’s switch to the Gregorian calendar in the 1700s, the tax year began and ended on ‘Lady Day’, a religious festival otherwise known as the ‘Feast of the Annunciation’. An 11-day discrepancy between old and new calendars – coupled with a later adjustment for leap years – led to the 6th April date.
Arcane British history aside, the tax year is an essential framework by which businesses conduct their financial management and calculate their annual tax obligations. The tax year is split into four quarters, numbered Q1 to Q4; these quarters are used for internal and industry reporting, and an essential part of managing financial growth and obligations alike.
Key Deadlines
While there are different ways of carving up the financial year, and different methods that businesses use independently to track revenue and expenses within it, there are relatively few key deadlines attached to the tax year – particularly for self-employed people submitting Self-Assessment tax returns.
The first deadline relates to registering for Self-Assessment. This must be done by the 5th of October, the tax year following your first tax year in operation. The next deadline is the 31st of October, for paper tax return submissions in order to give HMRC time to process them. The final deadline is January 31st, which is both the submission deadline for online tax returns and the payment of tax.
Preparing for Year-End
As a freelancer, preparing for year-end can be a difficult endeavour. Often, self-employed persons or smaller operations are ill-equipped to deal with more complex financial instruments, having built a career around another skill or trade. As such, many rely on a tax guide to coach them through the process and ensure no mistakes are made in reporting.
The best preparation you can undertake for your year-end is to formalise your accounting early. Make sure you are updating spreadsheets of your income and expenses each month for accurate reporting; these same spreadsheets can also be used to predict the tax you will owe at the end of the year, as a form of ready reckoner.
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