Efficient tax management is crucial for businesses, as errors can result in serious financial setbacks. But if you’re proactive, you can avoid the common tax mistakes that can easily cost you money and cause stress.
Read on to find out how.
Complete your tax returns early
Some business owners make mistakes with their taxes, costing them money in the long run. Usually, that’s because they miss the submission deadline and get hit by late filing penalties as a result.
Other times, they may miscalculate their tax liability and underpay their tax bill. In the worst case scenario, they have to undergo an investigation, pay a penalty as well as the tax due. Some businesses even pay too much in tax without realising they’ve overpaid.
Important dates and deadlines
So, you need to know all the deadlines related to registering and paying tax. Sole traders need to know about the following dates:
- 5 October: register for self-assessment
- Midnight 31 October: deadline for paper tax returns
- Midnight 31 January: deadline for online tax returns
- Midnight 31 January: pay the tax you owe
- 31 July: second payment deadline if you make advance payments towards your bill.
If you run a small company, on the other hand, the deadline for filing and paying your corporation tax return will land 12 months after the end of the relevant accounting period.
You should also think about completing your tax return as early as possible — that way, you can ensure all your figures are correct, double check them with an accountant and get back to your business with some peace of mind.
Know when to register for VAT on time
If your business’s taxable turnover for the last 12 months exceeds the VAT threshold (currently £85,000), you must register for VAT with HMRC. You must also register if you expect your turnover to go over £85,000 in the next 30 days.
Failing to register on time can result in penalties and interest charges on the VAT you owe. Knowing when to register is therefore essential.
You must register within 30 days of the end of the month in which you exceed the registration threshold. For example, if your turnover came to £100,000 between 10 September 2023 and 9 September 2023, you would have until 31 October 2023 to register; your effective date of registration would be 1 November.
If you expect to go over the threshold in the next 30 days, you have to register by the end of that 30-day period.
Don’t overlook your business expenses
New business owners might be unaware of all the allowable business expenses they can claim as deductions to reduce their tax liability. Others don’t keep good care of their records and lose proof of their expenses,
This can hurt your bottom line and cashflow, because you can deduct the value of your expenses from your pre-tax profit, reducing the pot of money taxes are applied to.
So, always make sure to include your allowable expenses on your tax return. If you’re unsure which costs you can offset against your profits for tax purposes, make sure to speak with your accountant.
Looking for more advice about handling your tax affairs the best way possible? Get in touch with us.