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Effective tax planning is essential if you are to minimise your tax bills. Simple tax planning can significantly reduce your tax liabilities.

The self-assessment tax return is an unavoidable burden if you are liable for self-employed tax or have complicated income tax affairs.

Corporation tax is charged on a company's profits. If you trade as a limited company, ensure that paying this tax is as painless as possible.

National Insurance Contributions (NICs) are payable whether you are self-employed or employed by your own company, although different rates apply.

As well as your legal obligations, you’ll want to ensure that payroll is painless and that you use any opportunities to improve your tax-efficiency.

VAT

Effective VAT planning aims to ensure that VAT is relatively painless, and that you are reclaiming as much as possible of the VAT you pay.

Capital gains are made when you sell something for more money than you paid for it. As a result, you can be subject to tax. Take professional advice.

Business property taxes apply to businesses with commercial premises.There are two commercial property taxes: business rates and stamp duty land tax.

If you have tax problems or face a tax investigation, it pays to seek professional advice and you must act rather than just hoping for the best.

Relief for taxpayers as HMRC offers deferral on July payment

14 July 2020

HMRC estimates that the move could boost cash flow for self assessment customers by £11.8 billion.

The UK tax body HMRC is reminding taxpayers that anyone who has difficulty paying their second 2019/2020 self assessment payment on account can defer the payment until 31 January 2021. Around 2.7 million taxpayers are eligible for deferral, of which 1.3 million are self-employed.

The second payment on account for 2019-20 is normally due at the end of July, but the government previously announced it is supporting the self-employed and others by allowing them to defer this payment. The option to defer is on top of additional support for the self-employed through £7.8 billion in grants paid through the Self Employment Income Support Scheme (SEISS).

HMRC says the deferral will "give immediate support to businesses and individuals by keeping cash at their disposal during this extraordinary time of uncertainty". 

Customers do not need to contact HMRC to defer their payment on account; they can opt into the deferral simply by not paying the tax bill due by 31 July 2020. If no payment is received, HMRC will automatically update their systems to show payment has been deferred and no interest or penalties will be incurred, providing it is paid in full by 31 January 2021.

The only action customers may need to take is to cancel their direct debit if they have one set up for their payments on account.

Angela MacDonald, HMRC's director general of customer services, said: "We want to support taxpayers as much as possible as they face uncertainty and difficult circumstances. That's why we want to remind those who may struggle to pay a tax bill right now that they have the option to defer their self assessment payment. They don't need to do anything to take advantage of this deferral. By simply not paying, HMRC will know they have deferred and we will do the rest."

However, it is important to remember that the deferred amount will be due on 31 January 2021, the same date that any 2019/20 balancing payment and the first 2020/21 payment on account will be due. This could mean three separate payments are due at once. Taxpayers should contact HMRC about paying these combined amounts in instalments if they have difficulty in paying them all in full. 

Payments on account are payable by self assessment taxpayers by 31 January and 31 July each year, unless: 

  • Their last self assessment tax bill was less than £1,000; 
  • They have already paid more than 80% of all the tax they owe at source, for example through their tax code.

Each payment on account is estimated, based on 50% of the previous year's self-assessment tax bill and they are advance payments towards the current year's tax bill. Further guidance on deferring a self assessment payment on account is available on the government website. Payments on account include income tax and Class 4 national insurance contributions where applicable, but not student loan repayments or capital gains tax.

Written by Rachel Miller.

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