If you’re an entrepreneur or business owner and you haven’t done so already, you will soon need to complete your self-assessment tax return – anyone who’s self-employed or a company director has to do one. While it can seem like an irritating distraction from the job of growing your business, with the right preparation filling out your tax return can be manageable and stress-free. If you need help, it’s advisable to make use of local chartered accountants in Watford. We at Dua & Co. are experienced accountants who would be happy to lend a hand. Here are our top tips for getting through the process of completing your tax returns, as an entrepreneur.
Given the steep penalties for late filings, it’s a good idea to start early – make sure to register soon to give yourself enough time. While it’s easy to let the important day-to-day running of your business distract you from your tax returns, taking a short amount of time to get prepared will pay dividends in the long run.
The penalties for filing your tax return late can be severe. If you’re a day late, £100 is added on to what you owe. Once three months have passed, £10 a day will be added, up to a total of £900. After six and twelve months, you’ll have to pay an extra £300 or 5% of the tax owed, whichever is greater.
As a business owner, you’ll need to keep records not just for yourself but for your business. You’ll need these to calculate your profit and loss for your tax return and because HMRC may ask to see your records. You must keep records of all sales and income, all expenses, VAT records (if you’re registered for VAT), PAYE records for employees, and records about your own personal income. You should keep proof of all of these, in the form of receipts, invoices and bank statements. Remember to keep all your records for at least six years after the 31st of January deadline.
The good news about submitting your tax return is it gives you the opportunity to deduct expenses – as an entrepreneur, you’re eligible for tax deductions on the basis of business expenses. This can include office costs, like electricity, heating, internet and phone bills, as well as staff, stationery, travel and legal expenses.
If you’ve sold all or part of a business in the last tax year, you may also be eligible for Entrepreneur’s Relief on any Capital Gains Tax you owe as part of that sale. Entrepreneur’s Relief fixes the tax rate at 10% on all taxable gains, and you can qualify if you’re a business partner or sole trader.
There’s always the chance that something unexpected could arise, or that filling in your tax return could prove more complex than you thought – at that point, it’s a good idea to consult with a chartered accountant. Here at Dua & Co. our friendly, knowledgeable team would be happy to provide any assistance that you and your business might require. Remember that the penalties for a late filing can be significant. So if you run into a problem, don’t hesitate – book an appointment with your accountant.