January can be a tricky time for companies and business owners. Even if you’ve kept on top of it all throughout the year, you can still have a time consuming task on your hands.
Companies face a number of challenges at this time of year, particularly as the tax deadline is in tandem with reduced revenue after the Christmas break.
It’s all too easy to forget that small business owners don’t have the luxury of enjoying much downtime over Christmas. The break is often a prime opportunity to catch up on important business admin and to start planning for the year ahead.
It’s worrying that nearly half of small businesses in the UK admit that they have struggled to pay tax bills, according to a report from insurer RSA. But what’s more worrying is that problem with accounting, or simply a lack of awareness about the process or the deadline, mean that as many as a quarter of companies are missing the due date.
Failing to file a self assessment form by 31 January can leave you facing an automatic £100 penalty.
The fines build up after three months, with HMRC starting to charge penalties of £10 per day, and after six months, the penalty amounts to five per cent of the person’s tax or £300, whichever is higher.
Being hit with fines will inevitably put a strain on the cashflow of small businesses, so managing your tax properly is important. We have here some tips to help you manage your taxes:
First, stay organised. You don’t want to be panicking the day before the deadline trying to find bits of paperwork, so it’s a good idea to file everything in an organised fashion throughout the year.
If you haven’t made any progress, there’s still a week until the deadline. Just don’t leave it until the last minute.
Second, keep tabs on all expenses and include all the information required. Make sure you don’t miss any sections out on the form, and include all earnings, including dividend income on any shares you own. You don’t want HMRC to reject your tax return if there are any mistakes, so also allocate time to double-check the form before you submit it.
Third, use tools available to you. The days of doing everything by hand are long gone. Software’s are available to give you a helping hand when managing your accounts, so do a bit of research to figure out which app is best suited to your business. Making use of these tools will make your life a whole lot easier; think of it as an investment.
Finally, if you are really stumped when it comes to your tax return, you can get a professional accountant involved who should be able to take all the stress away.
Yes, this will come at a cost, but you have to consider if that cost outweighs the penalty from HMRC. Seeking advice from an accountant on your finances can be invaluable to your business, particularly later down the line as your company grows.
Fulfilling tax obligations can be one of the biggest barriers to the success of a business, but don’t let it stop your company from having a prosperous future.