The financial year has just come to a close and I’m sure, for many of you, it was a frantic dash to get your books in order.
Those of you that have taken the plunge into self-employment should hopefully be enjoying the increased flexibility and potential profitability of being your own boss. However, even if your business is a success, it’s not all plain sailing and with freedom comes increased responsibility for your own personal finances and tax contributions. With money tight for many of us, it’s more important than ever that your books are in order and extra profit is squeezed from every pore of your business empire.
To minimise any future hassle, maximise income and avoid nasty surprises, here are my top tax tips for small businesses and the self-employed.
Be organised
It’s boring and it may seem like a chore (unless of course you love to tidy – I don’t) but keeping your financial records straight will make completing your tax return a much more straight forward process. Many businesses submit their company and personal tax returns up to nine months after the tax year ends, that’s a long time and a lot of invoices and receipts can build up over that period.
- Set up a filing system
Apart from the legal requirement, by keeping this information split between income and outgoings, you will have a better sense of cash flow, helping you to better manage your business. This means less unwanted surprises when it comes to tax return time.
- Get everything on a computer
Keeping your records on a spreadsheet, or using bookkeeping software, will allow you to see transactions in an instant. Bits of paper can easily go astray and if you use an accountant, their time costs will be reduced if your financial information is on-screen.
There is advice available on where to start when it comes to bookkeeping – you local business link advisor, http://www.businesslink.gov.uk will be able to help, plus many of the banks provide useful tips, such as this great check list from Lloyds TSB: http://www.lloydstsbbusiness.com/support/businessguides/book-keeping.asp.
Pension power
When it comes to a pension, having one not only gives piece of mind in old age, there are also some benefits attached, which may help reduce your tax bill.
If your personal, taxable income will take you over the higher rate threshold for 2009/10, you can reduce or eliminate this liability with pension contributions.
If you’re self-employed, personal contributions to an approved pension scheme attract tax relief at the highest rate. If you operate through a limited company, these contributions reduce corporation tax liability.
Paying into a pension, whatever your situation, will reduce your income and so lower your personal tax bill. Make sure you can only contribute what you can afford. For more information on pension schemes, visit: http://www.pensionsadvisoryservice.org.uk/.
Claim expenses
Accounting rules say that all expenses should be recorded in your accounts in the year in which they were incurred. You must make sure that when putting down expenses in your books, you clearly state which period any costs relate to. If you had expenses from last year, you should have claimed these before the 5 April deadline.
Expenses claimed after the financial year-end are subject to tax relief but you will have to wait a further 12 months to receive this benefit. For advice on claiming expenses, or any other tax query, visit http://www.hmrc.gov.uk.
Call in the experts
However small your business, it is still worth enlisting the help of an experienced bookkeeper to remove some of the hassle and make sure your getting the best tax deal possible. There will be an associated expense, but the potential savings in time and money will probably outweigh this outlay.
I provide free accountancy question and answer sessions on Twitter, join me twitter.com@AccountsAssist.
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