As the new tax year rolls around (which starts on 6 April), don’t get caught up in doing everything last minute. It’s better to get your business documents in order, understand any changes to tax, and find the right accountant if you need one.
To help you make sure you’re set up for a great tax year, here are five tips by Vicki Bracey, Product Owner of Mettle on how to get your small businesses’ taxes in order now.
Find time to focus
First things first, it’s helpful to have time to concentrate. With the tax return for 2021/22 opening from 6 April, make sure you set time aside to complete your return accurately. It’s less stressful and you are less likely to make mistakes if you have started early.
Get your records in order
Once you have time set aside to focus, you’ll then need to get all your records in order for the year. It’s easier to review and ensure your records are up to date while it’s still fresh in your mind.
You are required to keep accurate records of all incomings and outgoings for your business. This can include receipts for any goods, stock or equipment you have bought, sales invoices or till rolls and any paying-in slips or receipts from cash deposits.
You should also keep a copy of any bank statements and record any payments into or out of the business, whether that’s to you or your employees. Because you need to keep these records for at least five years (six if you are a limited company), we suggest you find a digital solution that’s easy to access. Accounting software like FreeAgent, Xero and Quickbooks could help.
If you sell products and the tax year also marks the end of your accounting period, you’ll need to organise a stocktake. Make sure you put enough time aside to check and record all the inventory that your business currently has on hand.
As a small business, you can also take this time as an opportunity to follow up on any outstanding invoices that haven’t been paid or are overdue.
Understand Making Tax Digital (MTD) for VAT
Since 2019, businesses with a turnover of over £85k have had to use MTD software to submit their VAT returns. From April 2022, a new stage will be introduced and MTD for VAT will apply to all VAT-registered businesses, regardless of turnover.
If you’re VAT registered and under the £85k threshold, you’ll need to store your business records digitally and send your VAT returns to HMRC through MTD-compatible software.
These changes are effective from a business’s first VAT return period starting on or after 1 April 2022. 1 April 2022 is also the end of the ‘soft landing period’ for businesses over £85k. If you haven’t already moved your VAT submissions to MTD compatible software, now is the time to take action.
Use a separate bank account for your business
A separate business account can make it much easier to identify the income and expenses specific to your business and is a requirement if you are a limited company.
If you don’t have one already, you could use the start of the tax year as a prompt to open a business account. Some accounts also allow you to store your receipts and invoices digitally, making it easy to find them when you complete your tax return at the end of the year.
Ask for help if you need it
To make sure you don’t pay too much tax, check what allowances you can use and what you can claim as expenses. HMRC has lots of online articles which will help you understand the rules which apply to you and your business.
If you need more support, you can also get help from an accountant. Finding a good accountant will help avoid mistakes and they may find opportunities for you to save money on your tax return.
With a new tax year just around the corner, these five tips will help you get all the business admin in order to make sure your business is set up for success.
If you’re ever in doubt, make sure to look at HMRC’s website, which is filled with advice on everything tax-related.
