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Self–Assessment season may be over for another year, but many small business owners are still dealing with the fallout from failing to file their tax return on time.
HMRC estimates that nearly 750,000 people missed the January 31st Self–Assessment deadline this year, meaning that they each risk a £100 fine for late filing and potentially more penalties if they do not pay their tax. So, if you’re one of those who didn’t file on time – or faced an uphill struggle to do so – how can you avoid this hassle next time your tax return is due?
Getting into good habits – managing your books regularly
If you struggled to file on time this year, chances are you were frantically looking through all of your expense receipts and bank statements, trying desperately to work out how much money you’d made and how much tax you owed. So, the most important change you can make in the year ahead is not leaving your bookkeeping till the last minute!
An effective bookkeeping system can take as little as to maintain. Just make every simple task like invoicing, managing expenses and forecasting your tax an integral, but manageable, part of your working life. You might find it’s easier to create a routine by keeping the same time every week – for example, an hour on a Monday morning – to look at your current financial position, create, send and chase invoices and log your most recent expenses.
Collecting and filing everything as it arrives
If you found yourself searching desperately for a vital receipt or bank statement to include in your tax return as the deadline was looming, it’s a good idea to try and capture and store that information as it arrives so that you have it to hand for next time.
That means having a safe filing place for all of your physical paperwork, as well as a robust electronic filing system for scanned expense receipts, bank statements and other important documents that your business collects throughout the year.
Finding an accountant early
Unless your business is the very simplest and smallest of sole trades, and you have no other income such as income from a job or property – or unless you are 100% confident of preparing your tax return correctly yourself – you would be well advised to ask an accountant to help you prepare or check your tax return.
Also, not all accountants are alike, so you need to make sure you find an accountant you are comfortable working with, who you can understand, and who understands you and your business. That’s not going to be easy if you’ve left your search until January and are rushing around trying to find someone to help you.
Start looking early and you stand a much better chance of finding the right accountant who can help you avoid the last–minute stress of Self–Assessment and who you can build a sound long-term business relationship with.
Not waiting to file your next tax return
You can’t file your tax return for 2017/18 until after 5th April 2018 (the end of the tax year) – but it’s a good idea to file it as soon as you can after that date, once all your paperwork has arrived. This means you’ll have one less job to worry about and can concentrate on running your business.
It’s also potentially good news from a tax point of view, because if your tax and class 4 NI liability for 2017/18 is less than your liability for 2016/17 was, then you may be able to reduce your 31st July 2018 payment on account. Also, if you’re due money back from HMRC, the sooner you file your tax return, the sooner they will repay that to you!
And don’t forget the most obvious benefit of filing early – avoiding all of the fines! By getting your tax return out of the way and submitted to HMRC long before the January 31st deadline passes, you won’t incur any fines from HMRC for filing late.
Those fines are as follows:
Filing your tax return earlier well in advance of the deadline will mean you won’t have to pay any of these penalties!