Does anyone ever enjoy doing their taxes? Unless you’re an accountant, the answer is probably no. However, accountant or not, as the owner of a small business, the tax burden will usually fall on you.
For SME owners, tax obligations are a looming burden that seems to cause high levels of stress and confusion. But this statement isn’t based on sentiment, it’s based on facts. Statistics show that over 50% of all UK small businesses have made mistakes when filing their VAT returns. With this in mind, here are some important things to remember when filing your taxes:
Make sure you’re NOT overpaying
An independent study carried out by accounting software providers, QuickBooks found that just 1 in 4 small business owners feel confident that they have filed their tax correctly. Considering how few SME owners feel able to complete their taxes efficiently or even correctly – could you be overpaying too?
Small businesses are 56% more likely to overpay on their taxes due to VAT filing mistakes.
Yes, you can claim this tax back during the later months. However, these mistakes ultimately cost you, and your business money and could negatively impact your cash-flow.
Don’t forget self-employment tax
If you’re self-employed, managing your own taxes can be a daunting affair. If you think that you might be entitled to tax credits, it’s important you look into this now to avoid losing valuable income later on.
If you are self-employed, did you know that you are entitled to the same personal allowance as someone who is employed? The OTS has published a document on this topic which aims to simplify tax for those who fall within this bracket.
Tax is ‘going digital’ – keep ahead of the changes
Tools such as smart scan highlight VAT return mistakes before they are submitted, helping you keep your cash flow healthy in the long term future.
What’s more, with the UK government aiming to make the transition to a completely digital way of ‘doing taxes’ soon, (Making Tax Digital for VAT started in April 2019 with the rest to come in 2021), SME owners need to listen up as this change will pertain to businesses taxes too.
The government hopes that the digital transition, including storing records online, will reduce the chances of mistakes being made. So, it’s important that SME owners read up on the changes that will take place here.
The 5 taxes small businesses should be aware of
1. Income tax; this is a tax you have to pay on all your income.
2. National insurance; this is a tax on earnings paid by both employees and employers. They help to build your entitlement to certain state benefits, such as the State Pension and Maternity Allowance.
3. Corporation tax; this is a tax you must pay on your trading profits, investments and selling assets for more than the costs.
4. VAT; also known as value-added tax, is a tax levied by the government on sales of goods and services. A small business making less than £79,000 does not have to register for VAT.
5. Business rates; these are charged on most non- domestic properties. Your local council will send you a business rates bill in either February or March each year.
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