It’s safe to say that 2020 has been a challenging year for many small businesses. However, as the year draws to a close and we prepare to welcome in 2021, it feels a little easier to see the light at the end of the tunnel.
To help with your business planning for the new year, here are some key updates you should mark on your calendar.
1. Self Assessment Deadlines
Self Assessment is not new, but it certainly is important. As with every year, the self-employed need to complete their tax return and pay their tax bill by 31st January. There’s no uncertainty about Self Assessment – every year, the self-employed need to complete a tax return and pay their tax bill.
If you haven’t started yours yet, why not check out: A Guide to Completing & Filing Your Self Assessment Tax Return
There is one slight difference this year. If you’re worried about being able to pay your tax bill before the deadline, you can settle your bill in instalments over the next 12 months. This is what is known as a Time to Pay arrangement.
This isn’t a new service, but the rules have been relaxed this year, meaning it’s now easier to apply for an arrangement online.
You can use the service if you owe up to £30,000. If you owe more, you’ll have to ring HMRC.
2. End of the EU Transition Period
The transition period for Brexit ends on 31 December. This means there will be new rules to follow as of 1st January 2021. This will affect your business if you:
- import goods from the EU
- export goods to the EU
- move goods to or from Northern Ireland
- travel to the EU
- are living and working in the EU
- are currently staying in the UK if you’re an EU citizen
As part of their ‘UK’s new start: let’s get going’ campaign, the government has released a tool that outlines what actions you need to take.
The aim of the tool is not only to help businesses prepare for changes but also to identify new opportunities.
3. New UK Budget
At the end of November, Rishi Sunak delivered a spending review outlining his plans to prioritise jobs, businesses and public services.
It has also been confirmed that there will be a Budget announcement in March. The annual Budget is where the government outlines its revenues, spending and plans for the future. A new Budget is created every financial year, however – the one planned for the autumn was cancelled in favour of the Winter Economic Plan and a spending review.
The Treasury’s permanent secretary, Tom Scholar, said that “the chancellor will be setting out the economic strategy that will support the economy as it moves out of the pandemic” by the Spring.
4. SEISS Grants Can Be Claimed
If your business continues to be significantly impacted and is suffering from reduced profits as a direct result of the COVID-19 pandemic, you may be able to access the third and fourth payments of the Self-employment Income Support Scheme (SEISS).
To be eligible, you need to have also been eligible for the previous SEISS grants, although you don’t need to have actually claimed them.
The third SEISS grant payment covers from November to January and can be claimed up until 29th January 2021. It’s worth 80 per cent of your average monthly profits, up to £7,500.
The final payment covers from February to April, but details on when you can apply and amounts aren’t currently known.
Unfortunately, SEISS doesn’t help if you were previously excluded from support. This means that if you’re newly self-employed, a limited company director, or earn more than £50,000 you can not access this scheme.
You might be able to access other support schemes, such as the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS). These have been extended until 31 January 2021, but are loans rather than grants.
5. New Off-Payroll Working Rules
New off-payroll working rules (IR35) were initially delayed by the government because of coronavirus. However, these rules are finally due to be released in April next year.
IR35 are the rules that HMRC use to discern if a contractor is genuinely self-employed for the purposes of paying tax.
HMRC obviously don’t want contractors who are actually employees to benefit from the same tax efficiency as those who are genuinely self-employed. The tax authority also doesn’t want employers to benefit from not paying employers’ National Insurance contributions or giving contractors employee benefits.
The new rules will mean that SMEs who employ contractors will now be responsible for determining a contractor’s employment status, rather than the contractor themselves. If they make a mistake, it’s the business owner’s responsibility, which could lead to penalties for the business.
Unfortunately, many believe that these updates could unfortunately hinder the flexibility of self-employed workers.
But given that it is unlikely that these changes will be delayed any further, both self-employed contractors and the businesses that hire them need to start preparing for the changes now.
6. Making Tax Digital Consultations
Making Tax Digital is HMRC’s push to bring the tax system completely online.
This is being gradually introduced in phases. Making Tax Digital for VAT is already in place with a roll-out of Making Tax Digital for Self Assessment expected in April 2023.
There is also currently a consultation on introducing Making Tax Digital for Corporation Tax. This is open until 5th March 2021 and HMRC want the opinions of companies that pay Corporation Tax, as well as agents, professional bodies and software developers.
It’s also running virtual consultation events so different business sectors can discover how they are going to be affected by Making Tax Digital. Find out more here.