Tax Tips for Small Businesses
Guest Post For a small business owner, dealing with the ins and outs of tax can be a confusing and intimidating matter. Here are seven top tips to help you navigate the subject and maximise your profits
1: Classify Your Business Correctly
Different tax rules apply to different business structures, so small business owners should think carefully about how they intend to operate, be it a partnership, sole trader or limited company. This initial decision can have huge implications on the amount of tax and national insurance a business will pay, so it is vital to research and take advice on this question before starting your small business.
2: Keep Precise Records
By keeping track of all your receipts and invoices, and making sure all of the paperwork relating to your business is kept in a secure place, you can ensure you are paying the correct amount of tax and avoid the penalties that are incurred as a result of inaccurate or incomplete records.
3: Be Aware of Allowable Deductions
There are many deductions that businesses are able to claim relief for in order to deduct costs from the gross income of a business, and being conscious of what they are means that gross profits can be maximised. For example, as well as general allowable expenses, small businesses that are run from home are entitled to deduct a percentage of household expenditure for tax purposes.
4: Submit Tax Returns on Time
If your Self Assessment Tax Return is not submitted on time, you face an automatic one-hundred pound fine as well as daily penalties. Whether or not your accountant is tasked with submitting your tax return, it is ultimately the responsibility of the director(s) of the business if the deadline is missed or mistakes have been made.
5. Pay Your Salary Correctly
Depending on what type of business you are registered as, the way you take money out for your earnings will be different, and will influence how much tax and national insurance you pay. Be sure to be familiar with these differences in order to stay completely in compliance with the legal position on these types of return.
6: Pay Your Employees' Salaries Correctly
If your business is large enough that you are able to employ others, it is essential to understand how to manage Pay As You Earn (PAYE) and National Insurance Contributions when paying your employees. This will ensure that the correct amount of tax is deducted from employee's weekly or monthly pay.
7: Seek Support from the Professionals
Although small businesses do not have to enlist the services of a qualified accountant, their experience and knowledge will often make the intricacies of tax laws much easier to manage. There are many benefits to using an accountant, as they can organize VAT returns and year-end accounts, give advice on tax efficiency and allowable deductions, and deal with the HMRC on your behalf
Small Business Success
By following these suggestions, small business owners can make certain that dealing with and paying tax does not become a burden, and consequently strengthen the business and increase profitability.