5 ways to manage your small business taxes
With another tax year coming to a close, business owners will be working hard to maintain the running of their business while making sure they’re on top of their finances from the year just gone.
However, new figures have shown that HMRC thinks that 22% of SMEs are filing incorrect tax returnswhich could mean more investigation and scrutiny for business owners in the future. With this in mind, it’s now more important than ever that business owners have a firm grasp over their accounts and taxes.
Whether it’s your first time filling out your tax return or whether you simply want to get better at managing the process, we’ve put together a few tips to help you out:
Understand Your Taxes
The first thing to do is understand your taxes and what exactly you should be paying. This will depend on what type of business you are – so you’ll need to make sure that you’ve classified your business correctly to avoid paying too much tax. For more details on what you should and shouldn’t be paying you can read our Small Business Tax Guide.
Keep Track of Deadlines
To avoid late payments and fines, it’s important to keep track of upcoming deadlines. Having a calendar to schedule these in with timely reminders can be helpful and you can also set up direct debits so that payments automatically come out of your account within the allocated time frame. It’s also well worth filling out forms and doing all your paperwork as soon you can. This will give you some buffer time to account for any missing pieces of information you might need or to resolve any issues or problems you may have well before the returns are due.
Keep Accurate Records
Keeping an accurate record of your business is vital when managing your taxes. This should include any evidence of your income and profits, any receipts that you may need, statements of interest from banks and building societies, and dividend vouchers. Keeping a record of these throughout the year will make the whole process a lot easier and means you’re more likely to avoid any costly mistakes. To help with this you could also invest in accounting software such as QuickBooks or Sage which will help keep track of what’s going in and out while keeping everything in one place.
You should also make sure that you and your employees keep hold of receipts for anything that you have purchased on behalf of the company.
Hire an Accountant
Hiring an accountant can not only take the time and hassle out of managing your taxes, but could also save you money while ensuring you’re doing everything correctly. Although this can seem like an added expense, it could save you money in the long term. A good accountant should be able to guide you through your tax return, assess your current situation and also be able to come up with a strategy on how you can improve the running of your accounts for the following financial year.
Your accountant may also submit your tax forms and payments on your behalf. If this is the case, it’s still worth double checking this as it’s essentially your responsibility, as the business owner, for making sure this is submitted accurately and on time.
Claim Allowances and Benefits
To avoid paying out more than you need to, you should claim all the benefits and allowances that your business is entitled to. You can deduct certain expenses from your profits before you prepare your accounts for tax. Some of these could include equipment, machinery or vehicles that are needed to keep your business running. However, you must make sure that any expenses are exclusively used for the purpose of the business and must not serve a dual purpose e.g. used for both personal and business reasons. You can find out more on the Gov.uk website.
While filling out and returning your tax return is never fun, having just a few practices in place can really make the whole process that bit smoother!
Liberis do not provide tax, legal or accounting advice. This guide has been created for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice.
Every effort has been taken to compile the contents of this guide as accurately and carefully as possible. However, Liberis cannot accept any responsibility or liability to any person in respect of anything done or omitted to be done in in reliance, partly or wholly, on any part of this guide.
To make smart financial decisions for your business, you should consult your own accounting advisors before engaging in any transactions.