Managing your money
Planning Ahead for the New Tax Year
As the saying goes, there are only two things certain in life: death and taxes. The end of the tax year is one of the busiest times for businesses of all sizes and according to a study by the FSB (Federation of Small Businesses), Britain’s small companies spend half a billion pounds a year on tax admin.
Whether you’re a new business owner, or a seasoned veteran, the end of the financial tax year can be an incredibly stressful time.
So if you’re still recovering from the mad rush in April, now’s the time to put in place a few “new tax year resolutions” to ensure the process is a lot more bearable next time around.
Here are some mid term handy tips to help you be better prepared for the new tax year.
1. Take Stock
Did you achieve your business goals for the last financial year? If not, why? Spend some time going over what went well, what could have gone better, and what didn’t work so well.
Try to understand the reasons behind any successes or failures, and apply what you’ve learnt in this new financial year. A good way of taking stock is to keep an up to date spreadsheet of income and outgoings.
This will highlight any problems, and areas for improvement. It’s not too late to start now.
2. Cut Costs
Look to see where your business is able to cut costs. Are there any areas where you’re spending money unnecessarily? Can you renegotiate any deals? Can you sell any unused assets?
Electricity costs have doubled for businesses over the last decade so think about reducing your energy costs. Try using uSwitch for Business’ comparison tool to find out if you could get a better deal.
3. Bad Debt
Be sure to write off any bad debts (e.g. a debt that cannot be recovered) before the new tax year. By doing so you will be able to reclaim VAT you’ve paid HMRC but not received from a customer.
To qualify for this the debt has to be between 6 months, and 4 years and 6 months old. While bad debt is difficult to avoid, credit checks can be an effective method of seeing how likely new customers will be able to pay in full, and on time.
4. Plan Ahead
Hopefully you’ve set a budget and some objectives for the coming financial year and if you still haven’t prepared a cash flow, do so now.
While you may have to readjust these during the rest of the year depending on how your business performs, they should allow you to measure your progress.
A solid cash flow forecast will also highlight any potential problems between now and the end of the tax year.
If your business is doing well and you plan to reinvest, do it before the end of the tax year. Doing so will allow you to write off purchases for the upcoming year, to the previous year. This can make a big difference if you’re buying a major item.
Also, if you’re planning to do any serious buying, save it for towards the end of the financial year as you’re able to quickly claim back business expenses, and VAT in goods or services purchased for your business.
6. Stay Organised
Did you find yourself scrabbling through your desk draw in the middle of the night searching for receipts at the end of the last tax year?
Don’t leave it until next April to dig out all your paper work. Even a basic filing system will help you avoid a last minute meltdown. Instead of letting your paperwork pile up, drop any important accounts, PAYE documents or tax files into your filing system as and when you get them in.
Online accounting software can save you hours and make your life easier. It’s scalable, cost-effective and easy to use. It allows you to better track spending, and as a result, make more informed business decisions.
It’s far easier setting this earlier in a new financial year than towards the end. There are many affordable pieces of software out there such as Xero, Sage and FreeAgent; and all have competitive monthly price plans starting from £5 – £29 a month excluding VAT.
8. Consult an Accountant
If you’re not already using an accountant, have you thought about investing in one? This will save you time, and potentially money in the long run. Time previously spent checking accounts can now be used on building your business.
If you’re not sure about how to choose an accountant, smallbusiness.co.uk have written an excellent article about how to find the right accountant for your business. Or you could look for members on websites of such organisations as the ICAEW or ACCA . Short list about four, research their websites and then arrange a face-to-face meeting.
9. Familiarise Yourself with the Last Two Budgets
Do you know how the March and July Budgets will affect you? If not, it’s a good idea to find out. Some changes could be helpful to you and others not so.
Corporation tax has been reduced to 20%, for businesses making a profit in excesses of £300,000, the national insurance allowance has been increased by 50% and there is a promised a review of business rates.
The March Budget also declared the slow death of the dreaded annual tax return (small business owners rejoice!). By 2020 you’ll be able to use a digital account to keep your records, dramatically reducing the time you spend on the phone with HMRC. However, there is a new minimum wage of £7.20 from April 2016.
10. Know Your Deadlines
Last, but by no means least: don’t let any deadlines sneak up on you next year, mark them on your calendar, set reminders! If you miss them, the penalties are steep.
How did your finances fair up at the end of the tax year? Did you make gains or a loss? Are you looking to expand this year but you’re not sure how to secure the finance for your small business? Why not give Liberis a call to discuss how a small business cash advance could be the solution to business growth.