UK Taxes: 7 Tax Tips Small Business Owners Should Know
The way the tax system works can often be confusing to business owners, and that's why we've put together some essential tax tips for small business owners. Whether you own your own company, run a franchise or are an independent contractor, understanding how the tax system works is important in making sure you pay the right amount of tax.
1. Meet Tax Deadlines
You need to submit your tax return by the due date, which is normally the 31st of January, for a calendar year return. However, your tax bill may increase if you file a late return.
There are penalties for late filing, and a reassessment will be carried out if you file a return over three months late. You will be charged penalties on any unpaid tax, interest and a late filing penalty. That's why it's important to meet your tax obligations on time.
2. Always Keep Accurate Records
You need to keep records for a period of six years because it's possible this information may be used in a future audit. If you don't keep accurate records, you may end up paying more tax than is necessary.
3. Claim Allowances You're Entitled To
By claiming your tax allowances, you can either pay less tax or have more of your profits left over. You should claim allowances such as your personal allowance, small business rate relief, married couple’s allowance, capital allowances, dividend allowance, small companies' rate relief, the annual investment allowance and enterprise zone allowance.
4. Take Advantage of Cloud Accounting Software
Most cloud accounting software allows you to prepare and submit your tax return online and also helps you keep accurate records. You can also use cloud accounting software for free, although you may need to pay a small monthly fee.
5. Reclaim All Business-Related Expenses
You can claim for just about any business-related expense, including travel and subsistence costs, advertising, domain names, telephone bills and equipment. As long as this money was spent for business purposes and you meet the tests for a business expense, you can probably claim it.
Claiming your business expenses can reduce your tax bill and is worth doing if you are eligible.
6. Think About Other Tax Deductions
There are many other tax deductions that you can claim that you may not have thought about. For example, you could claim subscriptions to professional bodies, trade associations and business magazines. If you run a business that provides services to other businesses, you can also claim VAT incurred on providing those services.
7. Hire a Good Accountant
Tax rules can be complicated, so if you're not sure about your tax obligations, it's best to consult a professional accountant. You should find an accountant you understand, who is easy to communicate with and always be available in an emergency.
Get Your Taxes In Order
If you follow these tax tips for small business owners, you'll be able to reduce your tax bill and also improve your cash flow. Understanding and complying with the tax law will help you avoid tax penalties, and you can also end up paying less tax overall.
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