Tax tips every small business owner needs to know
Given the many regulations, and deadlines you have to comply with, it’s only natural to feel overwhelmed. However, with the right information and strategies, you can successfully navigate submitting your tax, avoid common mistakes, and make the most of your deductions. Here, we share tax tips that every small business owner needs to know now to help you streamline your tax preparation and maximise your savings.
Our tax advice
Keep detailed records of your expenses. One of the most important things you can do to prepare for your taxes is to keep track of all your business-related expenses, including receipts, invoices, and bank statements. This documentation will help you identify which expenses are deductible and estimate your taxable income. You can use accounting software or apps to streamline this process and save time.
Separate your personal and business expenses. Mixing personal and business finances can be a costly mistake when it comes to your taxes. To avoid confusion and unnecessary scrutiny, be sure to keep these expenses separate. Use separate bank accounts, credit cards, and accounting software for your business and personal finances.
Know your deductions. Small business owners can deduct a wide range of expenses, such as rent, insurance, maintenance and repairs, office supplies, advertising, car/van and travel costs, and equipment purchases. Be sure to review HMRC guidelines for allowable deductions and keep accurate records of these expenses throughout the year.
Consider hiring a professional. If you find tax preparation to be overwhelming, consider hiring a tax professional to help you navigate the process. An accountant can review your records, identify deductions, and provide advice on minimising your tax liability.
Stay current on tax laws and regulations. Tax laws and regulations can change often, so it’s important to stay current on the latest updates. Subscribe to newsletters from HMRC, sign up for tax alerts, or seek guidance from a tax professional to ensure you’re complying with the latest standards and avoid penalties.
Plan ahead for next year. It’s never too early to start planning for next year’s taxes. Review your current tax strategy, identify areas for improvement, and make changes accordingly to maximise your deductions and avoid surprises at tax time.
Be an early adopter of Making Tax Digital (MTD). The government initiative requires businesses to maintain digital records of their income and expenditure and submit quarterly reports to HMRC. As of April 2022, it has been a requirement for all VAT-registered businesses be signed up for MTD and ensure digital records are kept and use third-party software to submit their tax returns to HMRC. Self-employed individuals and landlords with an income of over £50,000 will soon be required to switch from manual submissions to keeping digital records using software that can link securely with HMRC systems. Xero and Quickbooks are two popular software solutions that can help you comply with MTD for Income Tax Self-Assessment. Read more about the software in our article.
Work with a tax professional
Managing taxes as a small business owner can seem overwhelming, but it doesn’t have to be. Remember to stay organised, keep accurate records, seek professional guidance when needed, and stay current on tax laws and regulations.
At McKenzies Accountants, we offer an initial free consultation to chat through your requirements and what might be the best route for you. Whether that’s to help set you up with Xero through to providing Bookkeeping services or managing your annual accounts for you.