Running your own business is hard enough without adding the complexity of preparing and filing business taxes each year.
In tax matters, making financial decisions without consulting a tax advisor or an accountant can put you at risk and can cost you more money in the long run.
To help you in your tax planning here are six tax tips for your business,
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1. Check the Tax Date
To prepare your taxes on time, you need to have the deadlines of all the taxes in your mind.
Here are some key dates to filing tax returns.
Self Assessment (Sole Trader) deadlines
- Register for Self Assessment if you’re self-employed or a sole trader – 5 October
- Tax return and paying tax owned or first half of payment on account – 31 January
- Second payment on account – 31 July
- Online self-assessment tax return submission deadline- 31 January.
Value Added Tax (VAT) deadlines
- Filing & paying your VAT Return – 1 calendar month and 7 days after the end of a VAT Accounting Period.
- Filing a VAT Return if using an annual accounting scheme: 2 months after an end of the 12-month VAT accounting period.
- Paying VAT if using an annual accounting scheme: make advance VAT payments towards your VAT bill – based on your last return
The Corporation tax deadlines
- Filing corporation tax returns 12 months after the end of your Corporation Tax Accounting Period.
- Paying the corporation tax (up to £1.5m taxable profits): 9 months and 1 day after the end of the accounting period for corporation tax.
- Filing annual accounts with Companies House: 9 months after your financial year ends.
- Filing your first accounts with Companies House: 21 months after the date you registered with Companies House.
Note that taxable profits over £1.5m must be paid in instalments.
- Full Payment Submission (FPS) – On or before your employee’s usual payday
- Employer Payment Summary (EPS) – By the 19th of the following tax month
- Paying HMRC – You must pay an amount owned based on the FPS in the prior month, minus any reductions in the EPS from the current month by the 22nd of a tax.
2. Prepare for the Making Tax Digital
Making Tax Digital (MTD) initiative from the UK government requires virtually all businesses & individuals in the UK to do their government taxes via accountancy software.
Making Tax Digital for VAT was the first part of this programme to become law, back in April 2019.
The majority of landlords and business with property or business income above £10,000 will be required to use compatible accounting software for their income tax accounting for the first full accounting period commencing on or after 6 April 2023.
So, if you’re not already using software, then start using it.
3. Make Use of Government Helps
Suppose you are having difficulties in getting your upcoming Self Assessment tax payment together, which is due on 31 January 2021. In that case, you can contact the HMRC to see if you’re eligible for this support, in any event, using Time To Pay – and it is not limited to COVID-19 help.
The Self Assessment payments which were due on 31 July 2020 can be paid back across the 2021 calendar year.
You can access this help by making a request using the HMRC Time to Pay Scheme.
4. Set Up the Direct Debit
Most people simply pay tax bill when it is due, perhaps by bank transfer or online on the HMRC website.
You can also set up the direct debit to automate the payments to HMRC.
If you only pay the single payment on 31 January each year, then you will need just one Direct Debit. But if you typically make the payment on account on 31 July, then you will need two.
Setting up a direct debit is easy. Simply follow the instructions provided by HMRC. Also, be aware that it can take around 5 days to set up – so make sure you will sort it out well ahead of time.
5. Set Up the Separate Tax Account
It is wise to create a separate bank account for the money you set aside for tax each month. This need not necessarily be the business bank account.
Business bank accounts have monthly fees. Using your personal bank account, while tempting for your convenience, is not a great idea.
In case HMRC ever decides to investigate your business, then it may demand to see your bank statements.
6. Hire the Right Accountant
A most stress-free way to file a tax return is to have somebody else do that for you.
A specialist accountant can deal with sifting through your paperwork and ensure nothing has been missed and can relax knowing your taxes are in the hands of the expert.
Work with your accountant from day one of opening your business, not just in tax season, in many cases your accountant is able to make savings to your final tax bill which can go some way towards paying off their fees.
Tax tips mentioned above can be used together during tax season.
Yet as we have seen above, there’re ways of making tax season easier – and getting the most out of your tax system to ensure your business is compliant but does not overpay.
Overall when it comes to tax, a little preparation and investigation can go a long way towards making life easier for your business.