The new self-assessment tax return and why you might want to file early
Happy New (UK Tax) Year, everyone. The new year brings with it a revised self-assessment tax return form, some dilemmas about how to account for any Covid support you were lucky enough to receive, and some possible motivations for early submission.
Changes to the form
Most if not all actors, stage managers and creative team members will be self-employed at least some of the time (see our earlier blogs about this). Tax for actors is an area already full of complexities and doubts, and if you received the SEISS grant or even local authority support, there is now a very precise way that you have to report this on your return. There are 6 (yeah, just the 6!) things to consider:
A grant from any Covid support scheme (SEISS, local authority or devolved admin) is taxable in 2020-21 if you received it in 2020-21. It doesn’t matter if the tax year isn’t your own accounting year, nor that SEISS Round 1 was partially intended to cover March 2020. You still count it on the new 2020-21 return.
Some types of grant or gift are not taxable. If a charity (eg Theatre Artists Fund, Actors Benevolent Society) gave you a hardship grant, for example, then this is generally not “business income”. DYCP grants from the Arts Council are complex in this respect and if you received one, we strongly recommend that you consult us or another accountant specialising in the creative industries.
If you received furlough payments from an employment contract, these are not “Covid support”. Treat them like ordinary wages in the Employment section, exactly as if you had worked normally. (Furlough is only relevant here if you received the grant directly from HMRC because you actually employed somebody else using PAYE for them.)
There is a brand-new box 20.1 on page 8. You must tick this if you received any Covid support (SEISS, local authority, or devolved admin) to confirm that you’ve accounted for it as taxable. Be careful – it’s easy to miss.
If you complete the self-employment section, then there is a new box in which to enter the total amount of Covid support you received in the tax year 2020-21, and this becomes part of your tax calculation.
There is a whole new section on page 5 in which you are asked to declare any Covid support which you received “incorrectly”. There are potentially horrible pitfalls with regard to this section. We believe that it will be exceptionally unusual for you to use it. Above all, you need to be extremely clear that this section does not require you to make a retrospective analysis of your applications for SEISS (especially Round 3) and to regard them as “incorrect” if things turned out better than you hoped for in the event – but the guidance is framed in such a way as to make you think it might. If you are particularly concerned, please get specialist advice; but the general rule is, most people will not have claimed incorrectly, and for the few who have, this form is probably not the best place to deal with the problem.
At risk of repetition, we hope that you are one of those ‘lucky’ people who do have to consider these issues, and not one of the many, horrendously unfairly “Excluded” (some of whose cases we, and Equity, are still helping to argue with HMRC and the Adjudicator).
Many people will know that you could not submit your form until yesterday, and you now have plenty of time until the deadline – 31 Jan 2022. However, there are quite a few situations in which you might want to file early, especially if you are less busy now than you will be later in the year:
If you are due to make a payment on account on 31 July 2021. This payment is calculated based on your 2019/20 earnings, so it’s almost certainly wrong. It won’t be adjusted until you file however, and if you file after 31 July, you’ll already have paid it and it will be adjusted retrospectively. So if you really want to know where you are in advance, file before 31 July.
If you claimed to reduce your payment on account for 31 Jan 2021 and 31 July 2021. If you underestimated this (which admittedly may not apply to many people) then you risk incurring small amounts of interest unless you correct the payment on account due on 31 July 2021 before that date (and you’re already incurring them on 31 Jan 2021 amounts).
If you are due a tax refund, perhaps because you paid some PAYE tax on a casual or ‘day’ job, but have made a loss in your self-employment business (this could be many actors and creatives in 2020-21 for obvious reasons). This situation will allow you to offset your loss against your PAYE earnings and claim a refund. (Naughty accountants smirkingly call this “sideways relief”. But not us.)
If you have complications or doubts, get going early. We are always happy to help you – but we love helping you even more during the summer when there is time to think about it, not at 5pm on 31 January. Thanks!
If you have any problems or questions: call us for free advice on 08000 487626, message us on Instagram @accounting4actors or email firstname.lastname@example.org . Our advice about Covid financial questions is free and always will be.
Please visit www.accounting4actors.co.uk and find out about tax for actors, accounting for creative and cultural industry professionals, actors’ tax returns, and all accounting for creatives.