Tax discounts, tax pie chart, calculatorAny self-employed individuals such as sole traders, contractors and partners of partnerships, who are in their first year of operating could be eligible for tax discounts by paying their income tax early.

In the first year of trading, sole traders, contractors and partners usually do not need to pay their Terminal Tax (year-end tax) for around a year or many months after the tax year ends. This is usually 7th February of the following year, or 7th April the following year if you use a tax agent. However, you could be eligible for a 6.7% tax discount on your income tax if you pay some or all of your income tax before the tax year ends (by or before 31st March).

Managing cash flow has become even more challenging for some sole traders, contractors and partnerships in recent times so we recommend thoroughly assessing your current and forecasted cash flow to determine if paying your income tax early is a good option for your business. Tax discounts are a great incentive and saving provided you do not jeopardise your cash flow status.

If you do decide to pay your income tax early you will need to accurately calculate what you owe. You must tick the relevant box on your tax return to apply for the tax discount. Your accountant can help with this, as well as advising on how to set up good systems to manage your taxes.