In all the excitement of the last year, it would be very easy to forget about mundane things like tax returns. In fact now is a good time to get them looked at, I’ll explain why.

When you submitted your previous tax return reporting profits for the 2019/20 year, Covid-19 may have had hardly any impact on your business, so probably profits were still at a reasonable level. At the time, if your tax liability was over £1,000 then you would have been required to make payments on account for 2020/21 in January 2021 and July 2021.

Fast forward a year and profits for 2020/21 are more than likely much lower. However, we must not forget about any grants you may have received, as these are taxable I’m afraid. On the assumption that profits are lower than the previous year, if you can complete your 2020/21 tax return before 31st July 2021 then you can reduce, or even remove altogether, the second payment on account due in July 2021 helping that much needed cashflow as you re-open.

This does only apply to sole traders and partnerships, not companies who have different deadlines, although it does apply to personal income of directors, so if you are a director, drawing less from your company over the last year, it may pay to think about that dreaded tax return.

Of course, it’s a good idea to try and prepare your tax return around now anyway as that will tell you what you will need to pay in tax in January and July 2022, giving you time to plan your cashflow. Indeed, some businesses have benefited from Covid grants so may have seen profits increase (lucky for some!), so larger tax bills than usual. Be prepared!