Struggling to get your head around small business tax?
Benjamin Franklin once said: ‘in this world nothing can be said to be certain, except death and taxes.’
And he was right!
As a business owner, you have to pay taxes. But small business tax doesn’t have to be stressful!
Here are 5 ways to make managing taxes easier so you can make your business more tax efficient.
Meet tax deadlines on time
The key to keeping on top of your business taxes is organisation.
Leaving things to the last minute could result in rushed accounts, missed deadlines and mistakes, which means unnecessary fines from HMRC and Companies House. Filing your tax on time removes the stress and anxiety of filing last minute and it means you’ll avoid fines and last minute penalities.
Keep track of what you have to pay and when, and don’t leave things to the last minute. This includes staying on top of the bookkeeping.
Know what you have to file and when
Whether you operate as a sole trader or a limited company, it’s important to know exactly what taxes you have to file each year. This helps remove unnecessary stress and avoids any late filing penalties.
If you operate as a sole trader, you’ll only need to file a Self Assessment Tax Return on 31 January each year.
If you own a limited company, things get a little more complicated.
For limited companies, here’s what you’ll need to file as a minimum each year:
- Company Accounts
- Corporation Tax Return (CT600)
- Confirmation Statement
- Self Assessment Tax Return
- VAT Return
Know your tax deadlines and make sure you plan ahead in plenty of time. And don’t forget to set money aside for paying your tax bills.
Keep accurate records
When it comes to tax, it’s important that the information you’re submitting is correct, otherwise you could face fines and penalties.
Whilst it might not be the most glamorous part of running a business, good bookkeeping is essential for keeping accurate records. A good bookkeeping setup like Dext and Xero is crucial for assessing how your business is performing and for reviewing its current tax position.
Claim all your allowable business expenses
Claiming all of the expenses you incur through your business is a good way to lower your corporation tax bill. You can claim for things like office equipment, business mileage, and pension payments.
As a limited company, there’s a range of expenses you’re entitled to, which can help keep tax down. HMRC’s rules on claimable expenses can be a bit fuzzy but, generally speaking, the golden rule is that they must be wholly, exclusively and necessary for business.
Just make sure to keep good records of all your business expenses.
At Complete, we recommend using Dext to do this.
Just upload your expenses to the app and it will extract the data for you and pass it into your accounting software, giving you an accurate, up-to-date view of your accounts. No need to manually enter data or hang onto paper receipts.
Have a tax plan in place
When it comes to tax planning, the old adage runs true– failing to plan is planning to fail.
Making the time to prepare and plan for your taxes can help you avoid overpaying tax.
But beware of tax avoidance schemes! If you’re looking for ways to lower your tax bill, always remember to run these by your accountant.
Talk to your accountant
When it comes to small business tax, a good accountant is worth their weight in gold. They’ll help you get setup on the right software to make filing less stressful. A good accountant can also advise you on legitimate ways to lower your tax bill and help you implement a tax planning strategy going forward.