With the 31st January 2023 self-assessment deadline approaching, we have revisited our blog on the key benefits and features of a self-assessment loan and how this can support your business.
In January and July each year, the Self Assessment fee can be a significant outgoing for sole traders and partnerships. This often has a negative impact on cashflow for many businesses, inhibiting their operation and delaying their growth.
What many do not realise, however, is that this doesn’t have to be the case.
With a Self Assessment loan, you could spread the cost of your tax bill over time enabling you to retain capital in your business while making manageable monthly repayments in line with your budget. Read on to discover more about Self Assessment loans.
What is Self Assessment?
Self Assessment is the process by which you advise HM Revenue & Customs (HMRC) of your income, gains and relevant expenses for a tax year. You currently do this by completing a tax return, sending it to HMRC and calculating your own tax liability (the online return will do the calculation for you automatically).
You must send a tax return if, in the last tax year (6 April to 5 April), you were:
- self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on).
- a partner in a business partnership.
The government’s online system will calculate how much tax you owe based on your earnings, and this amount needs to be paid by a specific deadline to avoid additional penalties.
What are the payment dates for tax returns?
A UK tax year runs from 6th April to the following 5th April. For example, if we are talking about the tax year 2022/2023, it started on 6th April 2022 and will finish on 5th April 2023. Generally, the payments need to be made in January and July each year.
- 31st January (during the tax year): The first payment on account for the tax year ending the following 5 April is due, e.g., the first payment on account for the 2022/23 tax year is due by 31st January 2023.
- 31st July: The second payment on account for the tax year ending the previous 5 April is due, e.g., the second payment on account for the 2022/23 tax year is due by 31 July 2023.
NOTE: Depending on your circumstances, there may be other relevant dates and deadlines during the year to be aware of. Visit the government website for more information.
What is a Self Assessment loan?
A Self Assessment loan provides the cash you need to pay your fee by the relevant deadline. You then make repayments on the loan over 6, 10, or 12 months so you can align the repayments with income and manage finances more effectively. The capital retained can be used to operate and/or invest in the business.
Income and other outgoings are normally budgeted monthly so spreading the cost of self-assessment can help cashflow, align the outgoing with income and enable you to manage finances more effectively. The capital that you retain can be used to grow the business.
For LLP members or Partners who are taxed individually on their share of the firm’s profits, a self-assessment loan can be taken out by the firm to spread the cost, aligning it with other business outgoings and income.
How do Self Assessment loans work?
- Your partners complete their self-assessment and you collate the combined amount due to HMRC.
- You can then submit that amount to us and we will source the most competitive finance option for you to allow you to spread the cost.
- We’ll secure an agreement to finance from one of our specialist funders who will pay HMRC direct.
- The payments will then be made by the firm to the funder over time to settle the balance.
- The capital retained within the business can then be utilised for other means to help grow the business.
- The funder will need an HMRC statement confirming all outstanding tax liabilities at least 7 days prior to the due date to ensure payments are made to HMRC on time.
In some cases, even if you have already made the payment to HMRC, we may be able to secure finance for you retrospectively if you contact us within 14 days of making the payment.
A financial illustration
Based on a £50k Self Assessment Loan (this is for illustrative purposes only, as individual circumstances differ).
- 12 monthly repayments of £4,492.20pcm = Total repayable: £53,906.40
- 6 monthly repayments of £8,760.43pcm = Total repayable: £52,562.58
Interested in a Self Assessment loan for your business?
If you are interested in spreading the cost of your next self-assessment tax bill over time to retain capital and enable you to manage your budget more effectively, get in touch with us today.
We will assess your business’ individual circumstances and work with you to decide if a Self Assessment loan or another finance solution would be the right choice.
Complete the form below to send us an enquiry.