You have two weeks left to register for self-assessment

It’s that time of the year again – and yet, two-thirds of sole traders don't know the self-assessment tax return deadline. Here's what you should be aware of.

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Research from leading card payments provider takepayments has uncovered a startling reality: two-thirds of sole traders in the UK are in the dark about the impending self-assessment tax return deadline, according to a recent survey. 

Only 3 in 10 (31%) sole traders were aware that the deadline for submitting their self-assessment form is when the clock hits midnight on the 31 January.

Overall, the survey found that:

  • 75% of business owners do not know at what earnings threshold they’ll have to start paying a higher tax rate of 40% (it currently stands at £50,271)
  • 73% were unaware that sole traders are not obligated to pay corporation tax
  • Nearly 1 in 5 (18%) of sole traders admitted to not contributing to a pension scheme
  • 21% of respondents did not have a three-month salary safety net saved up

Industry disparities in financial knowledge

The survey was taken by a variety of different sectors, and these findings were the most notable:

  • Retailers scored lowest, with a mere 13% possessing the accurate information. 
  • Real estate agents performed below average, with only 23% providing the correct answer. 
  • Law professionals, while the most informed among the groups surveyed, still didn’t reach a high standard, with only 42% answering correctly.

Sole traders more aware of penalties than tax thresholds

While the general requirements are hazy in the minds of most sole traders, one thing they do have a good understanding of is the potential penalties:  

  • 98% of sole traders understood there would be some form of penalty for non-payment
  • 91% were aware of the specific consequences if they failed to pay their self-assessment tax bill (involving penalties, interest charges and debt collection procedures). 
  • Only 2% thought nothing would happen at all.

The misconception about corporation tax

A significant 73% of respondents were under the impression that they needed to pay corporation tax, highlighting a widespread misconception. 

Unlike limited companies, sole traders are exempt from paying corporation tax

Saving habits and vulnerabilities

London-based and Welsh traders were most likely to pay into a pension scheme, with 92% saying they paid contributions. The least likely was the East of England, where only 55% of traders had a pension scheme.

While Welsh traders boasted the highest pension contributions, they were the worst UK region when it came to saving: 1 in 3 (36%) did not have at least 3 months’ salary saved.

Worryingly, 21% of all respondents admitted that they did not currently have at least three months’ salary saved as a safety net, leaving them vulnerable.

takepayments’ solution: their all-new tax calculator

In response to the research findings, takepayments has launched a Business Tax and National Insurance Calculator that is now available to use for free on their website. 

Jodie Wilkinson, Head of Strategic Partnerships at takepayments, emphasises the tool’s value, stating: 

“It’s not surprising that many small business owners are unsure of the legal obligations they have regarding things like tax and VAT. The rules can be quite difficult to understand, especially if you just want to focus on growing your business. 

The calculator should help take some of the guesswork out of paying tax. It’s a free tool that anyone can use, whether you’re an established business or a budding entrepreneur yet to register.” 

For sole traders seeking clarity on their tax obligations, you can try the takepayments tax calculator here.

Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

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