Managing taxes can be stressful for small business owners, especially if you’re unfamiliar with the intricacies of the UK tax regime. As a result, worrying about making tax mistakes is completely understandable.
However, by being proactive and aware of your obligations, you can avoid common tax mistakes to save yourself time, money and headaches. In this blog post, we’ll discuss some of the most prevalent tax errors and how to steer clear of them.
Common small business tax mistakes and how to avoid them
1. Not starting early
If you’re self-employed or part of a business partnership, you’ll need to file a self-assessment return. This document summarises your income and business expenses, giving HMRC the information they need to work out your tax liability. You may also need to submit a self-assessment return if you take a salary as a company director.
Companies, meanwhile, must file corporation tax returns. Similarly, this report tells HMRC about your taxable profits to determine your final corporation tax bill.
No matter your business structure, it’s essential to abide by the filing and payment deadlines. If you’re late, you may owe a fine and even some interest on top of your tax bill.
The self-assessment deadlines are as follows:
- 31 October: The deadline for submission of paper self-assessment tax returns.
- 31 January: The deadline for submission of online self-assessment tax returns and payment of all tax due.
For limited companies, the deadline for submitting your company tax return and paying the bill will depend on your financial year-end:
- 12 months after the end of the relevant accounting period: The deadline for submission of corporation tax returns
- 9 months and 1 day after the end of the accounting period: The deadline for paying your corporation tax bill.
If you’re submitting your company tax return for the first time, the submission deadline may vary.
Now, the first mistake that a lot of people make is leaving their tax return to the last minute. They then rush through the document, opening them up to mistakes – mistakes that could cause them to under-report income or even over-report it and pay too much in tax.
So, our first piece of advice is to start early and work slowly. Double-check figures and details, and make sure you’ve added every business expense to reclaim some money.
Also, make sure you remember to file on time! That sounds obvious, but some people forget to send their tax returns to HMRC before the deadline. Starting early should help with this as well, but you can also set yourself reminders on your phone or computer.
2. Failing to keep accurate business records
One of the biggest tax mistakes people make is not keeping accurate business records, especially those related to expenses and income. After all, HMRC will use your business figures to work out your taxable income – if something is missing, that will lead to an inaccurate filing.
By staying organised throughout the year, though, you’ll be better prepared when it comes time to complete your tax return, reducing the likelihood of errors or omissions. Using a professional bookkeeping service can help you manage these tasks more easily.
3. Avoiding deliberate or concealed errors
Deliberately underreporting income or concealing assets to lower your tax bill is illegal, and HMRC has sophisticated systems in place to detect tax evasion. So, always be honest – it’s not worth being anything else.
4. Not seeking professional advice
Tax is complicated and it’s hard to get it right the first time around, especially if you’re taking the task on alone. So, if you’re unsure about any aspect, seek professional advice.
HMRC has dedicated helplines and online resources to assist taxpayers, but you can also talk to a qualified accountant or tax adviser. As tax experts, we can help you navigate complex tax rules, maximise your tax deductions, and ensure compliance with HMRC regulations. In our experience, the peace of mind and potential savings we bring can far outweigh the expense.
Tired of making tax mistakes? We can prepare your tax return for you. All you need to do is get in touch with us. We look forward to hearing from you.