As a sole trader without proper tax planning in place, you could be paying too much tax.
All self employed individuals (sole traders and those who are in partnerships) are taxed via the self assessment system each year and pay their tax on their business profits after deductions for expenses.
The days of paper tax returns are soon to be long gone as HMRC are encouraging all taxpayers to submit their SA tax returns online. As a registrant of the self assessment system and as being self employed, you should automatically be sent a self assessment notice following the end of each tax year, which runs from the 6th of April to 5th April every year.
If you file your tax return online, you are given an extra 3 months to complete your return as the deadline for submitting online SA returns is the 31st of January. Much different to the 31st of October deadline which soon creeps up on you.
As a sole trader, your tax year will run from the 6th of April 2015 to the 5th of April 2016, if you were to submit a paper return you will have to have collected all relevant information and submitted this by October 31st, but opting for the online version gives you until January to pay all tax you owe for that tax year.
To ensure you are planning efficiently, you should consider all areas of tax planning before April 5th next year, and a good way to start is by looking at your current plans and finding opportunities to save money.
Income tax is the tax you pay on any income you receive and you can plan for these areas by looking at the following:
- Earnings from employment & self-employment
- Pensions Incomes
- Social Security Benefits
- Interest on Savings
- Rental Income
- Trust Generated Income
Capital Gains Tax
If there is an increase in value of an asset that you sell, you are obligated to pay capital gains tax on that asset.
Typical areas you should concentrate on:
- Stocks & Shares
- Business Assets
- Fine Art
It’s important to remember the tax is paid only on the gain in value since you first acquired it and it is not based on the total of the sale price. Tax rates can vary for higher or lower rate tax payers and at K A Farr & Co. Chartered Accountants in Southport, we can help evaluate if any gains could mean that you are then pushed into a higher rate tax band.
These assets can be exempt from CGT
- A primary residence
- Personal possessions with a value up to £6,000
- Betting & lottery windfalls
Savings and Investments
Our goal is to make sure you are paying the least amount of tax possible. If your money has been placed with a an ordinary savings account, you will automatically be taxed at a rate of 20% with an added 20% – 25% being owed by higher rate or additional rate taxpayers.
We ensure your family and loved ones future is protected – our goal is to help you pay as little tax as possible to protect them. Inheritance tax is paid if a person has died and their estate, this can be their money, possessions or property is worth more than £325,000, also known as the ‘Inheritance tax threshold’.
Our team of professionals here at K A Farr & Co. deal with inheritance tax issues and can do so with discretion and patience. Our advice enables a smooth transition and the minimisation of tax liabilities. We mitigate inheritance tax on family homes, family businesses and investment portfolios.
Key areas of Inheritance Tax includes:
- A gift to your loved one or family member
- Cash, property or investments to a trust
- Charity donations
- Life insurance policies
The sole traders we work with work over various different industries. Let us help you further with your personal tax planning for you as a sole trader, there could be areas where we can save you tax.
Contact our office to arrange a free meeting to go over areas of your tax planning – 01704 211 434