Taxing times
Tax is one of those things that divides people. My view is that it’s a sign of a society that cares about the people that make up the population - a collective decision to sacrifice some of our earnings and profit on assets to provide a basic range of public services that benefit all of us and protect the most vulnerable. Others (also known as selfish wankers) believe that the most vulnerable and less comfortable should live in squalor, & die in agony because they “don’t work as hard” so that they, themselves can have a bit more cash to squander on bullshit. It’s the American way don’t ya know.
When I started out in this business, I had no clients, no revenue, and therefore no profits. My accountant at the time suggested that I set a year-end date of 30th April, so my first year of accounts would only span 6th-30th April and would let me trade for 23 months before submitting another tax return. Consequently, since 2005 my self-assessment returns to HMRC have effectively been a year in arrears. This didn’t make any difference to me until the last few years when revenues started creeping up.
The “making tax digital (MTD)” changes are soon to be implemented by HMRC in an attempt to get rid of the archaic self-assessment system that has so many flaws and allows for abuse by those working in cash-only businesses. The MTD regime will introduce artificial intelligence into the fold, and require businesses to pay income tax on a monthly basis with a final annual return to make any corrections. It brings tax into line with those who are employed and eliminates the January 31st scramble associated with self-assessment.
Anyways, as part of this changeover, it was necessary to change my accounting period from the end of April to the end of March. Unfortunately, this meant that my year in arrears needed to be brought up to date by declaring 23 months of income this financial year. Given that i had record revenues, my profits had rocketed and took me into the 40% tax bracket. With the requirement to effectively hand over 2 years of tax, national insurance, and student loan repayments I was handed a tax bill of twenty grand just like that. I don’t even pay myself twenty grand in a year!
So, the next few months are going to be spent in penury, basically saving up as much as I can to cover a huge tax bill in January. Hopefully, it’ll be used to good effect - securing the NHS and public services. But I very much doubt it.
