Preparing for the End of the Tax Year as a Sole Trader
The end of the current financial year is fast approaching and while sole traders don’t need to worry about paying dividends or filing accounts with a public body, they do need to get their records in order. Explore our tips for preparing for the end of the tax year as a sole trader below.
When does the tax year end?
The current financial year runs from 6th April 2020 – 5th April 2021. Many sole traders choose to match their accounting year to these dates to keep things simple and avoid paying tax twice when starting out.
Year-end tips for sole traders
Check invoices have been paid
As a sole trader, it’s good practice to check your incomings and outgoings regularly. This is even more important at the end of the tax year, to avoid any confusion when it comes to preparing your balance sheet.
Ideally, all invoices issued in this financial year should be paid by 31st March. Set clear guidelines for your clients and if possible, invoice them earlier this month to ensure payments are received on time.
Make pension contributions
If you want to add money to your pension pot this year, do so by the 5th of April. £40,000 is the annual tax-free contribution limit, with a further 20% tax relief from the Government on balances up to that amount.
Make the most of your ISA
If you’re planning any future investments, it might be a good idea to check whether you can make any payments into an ISA or other tax-efficient savings account this financial year. The current ISA limit is £20,000 and this changes annually.
Compile all of your records
Sole traders must keep a record of all income and expenditure relating to their self-employment for 5 years. Compile all of your receipts and invoices for any goods or expenses by April 5th, as you’ll need to refer back to these when completing your 2020/2021 tax return.
Need a hand?
Want a better way to consolidate your records than slips of paper and spreadsheets? UWM is a team of expert accountants in Leeds that can make things easier for your business. Explore our innovative cloud accounting services online or contact us for more information.