Roughly a million sole traders in the UK could find themselves forced make prepayments of tax liabilities to HMRC that will exceed their actual earnings for the year.
This situation has arisen because a number of self-employed people operating as freelancers pay their annual tax liabilities on a twice-yearly basis, and the first deadline for prepayment will be January of next year. Many of these people have also seen their profits fall drastically during 2020 due to the impact of the COVID-19 pandemic, but the amount due in tax prepayments is worked out according to the profits of the year before.
This leaves self-employed people in this position looking at tax bills that were calculated for the period before their income was hit, and having to pay at a time when they are struggling. The internet self-assessment provider TaxScouts is suggesting that this will apply to around one million people.
According to Small Business, TaxScouts said that:
“While this is well and good in normal times, it doesn’t take into consideration the huge loss of earnings that so many of the self employed will have faced during the pandemic.”
HMRC has responded by stating that these people can defer their tax payments or ask for them to be lowered, as well as launching an online service that can be used to spread payments across a 10-month period. Speaking to an accountant for sole traders in Goole or any other area will help people clarify what their best option is.