Devlin-Whitworth Accountancy are a well established small family run accountancy & bookkeeping practice which has been operating out of Bolton for over 15 years assisting a wide variety of clients throughout the region ranging from self-employed individuals to small companies with several employees. The brilliant Simon Whitworth has written a thorough guide to small business tax tips for you!
For many small business owners, tax is one of the most challenging areas of running a business. And with good reason, too – the tax system can be complicated at times.
Good planning can help small businesses identify areas where they can save money on tax, money which can then be reinvested in the business. But there are other equally compelling reasons to take tax planning seriously, such as ensuring you are compliant with rules and regulations.
Thats why we at Devlin-Whitworth Accountancy have put together a list of the most essential tax tips to help your small business navigate the taxation minefield.
Know the deadlines
As you begin to run your business you should be aware of your tax deadlines, the first of which is the dates a tax year runs to and from; 6th April to the 5th April the following year. Any money received or paid out by the business during these dates will be the basis of your annual self-assessment tax return, which must be submitted by the 31st January after the end of the tax year.
For example if you begun your business in May of 2018, your tax year would run from 6th April 2018 to 5th April 2019 and your self-assessment return would be due to HMRC by 31st January 2020.
If you are running a limited company you will have the additional dates which your company accounts will due to Companies House and the date which your corporation tax return is due to HMRC. Be aware these are not always the same date.
Be aware of your allowances
When you begin working for yourself you will be required to pay income tax on your profit over your personal allowance, which as of 2018-19 tax year is £11,850. This means that income is only due once your profits are above this amount.
There is also the Marriage Allowance which is a government scheme to help couples where one partner earns less than their personal allowance (£11,850). Where this partner is earning below £11,850 they aren’t receiving all of their tax-free allowance. So they can transfer 10% (£1,185) of this allowance to their partner.
This means that the high-earning partner is taxed on less of their salary, so their take-home pay increases. This can save couples up to £230 a year.
When the time comes for you (or your accountant) to file your self-assessment tax return the basis of it will be the incomings and outgoings of your business throughout that tax year. This can become tricky and stressful if records haven’t be adequetely kept and could lead to things being overlooked and you paying more tax than you otherwise should.
To eliminate this or atleast to keep this to a minimum you should ideally maintain 3 sets of records, which includes:
- Cash book
The payments into and out of your bank account. Keep it up-to-date, and after a few months you’ll be able to use it as a forecasting tool rather than just a historical record.
- Sales invoice file/ledger
Store invoices in chronological order. Keep those which haven’t yet been paid at the front of the file to help your credit control.
- Purchase invoice file/ledger
Get used to making notes on invoices about when you paid them and how (BACS, cheque, cash etc). File them in chronological order. This will make your life easier and keep your accountants’ bill down.
Alongside these records you should also get used to keeping a piece of paper for every transaction be it a receipt or invoice. It’s easier to collect paper as you go along, rather than try to find it years down the line.
Pay yourself efficiently
The amount you pay yourself from your business obviously has an impact on the amount of tax you pay. How you pay yourself can also have a significant impact also.
The structure of your business can determine how best to pay yourself aswell, for instance if you are running a limited company it may be more beneficial to pay yourself a small salary and then make up the rest through dividends. This can save on tax and national insurance as dividends are taxed at a lower rate.
Also if you are part of a partnership paying yourself brings up its own issues and complications, usually how the profits of the partnership are split is detailed in a legal agreement drawn up at the time of incorporation.
This is not as much of a worry to sole traders but it is always worthwhile being aware of how much income tax and antional insurance is due on your income or pay.
Don’t leave it until the last minute
Its probably not the best idea to wait until the deadline to plan your taxes and file the relevant tax return(s) with HMRC and leaving it too late can often result in having penalties or more tax to pay.
The earlier you start preparing your taxes, the more time you have to get it right—for example, tracking down missing receipts so you can claim all the deductions you’re eligible for. If you’re up against the deadline, you may be tempted to let them go.
Save yourself the potential stress by getting your tax filing over with ASAP.
Filing taxes can be overwhelming, complicated, and even scary at times, so don’t be afraid to ask for help if you need it.
We at Devlin-Whitworth accountancy offer a fully comprehensive service, if you would like more information get in touch for a free consolutation at email@example.com or visit our website