Avoid These Common Small Business Tax Mistakes
As a small business owner in the UK, understanding and fulfilling your tax obligations can be a daunting task. The UK tax system is complex, and failing to comply with the rules and regulations can lead to significant financial penalties and even legal action. In this blog, we will cover some of the most common tax mistakes made by small business owners in the UK, and provide guidance on how to avoid them.
Understanding your tax obligations as a small business owner
As a small business owner in the UK, you are required to pay a variety of taxes, including income tax, National Insurance contributions, and VAT. It is important to understand your tax obligations and ensure that you comply with them. Failing to do so can result in hefty fines and legal consequences.
Registering for VAT
If your small business has a turnover of over £85,000 per year, you are required to register for VAT. Failure to register for VAT can result in a fine, as well as having to pay any VAT owed. It is important to keep accurate records of your turnover to ensure that you register for VAT at the appropriate time.
Keeping accurate records
Keeping accurate records is essential for ensuring that you comply with UK tax laws. This includes keeping track of all income and expenses, as well as maintaining accurate records of any VAT paid or owed. Failing to keep accurate records can result in penalties and legal action.
Making tax payments on time
As a small business owner, you are required to make tax payments on time. This includes paying income tax, National Insurance contributions, and VAT. Failing to make tax payments on time can result in penalties and interest charges.
Common small business UK tax mistakes to avoid
Not claiming all allowable expenses
As a small business owner, you are entitled to claim certain expenses as tax deductions. These include expenses related to running your business, such as office rent, equipment, and travel expenses. Failing to claim all allowable expenses can result in paying more tax than necessary.
Mixing personal and business expenses
It is important to keep personal and business expenses separate. Mixing personal and business expenses can make it difficult to keep accurate records and can result in paying more tax than necessary.
Failing to submit tax returns on time
Failing to submit tax returns on time can result in penalties and legal action. It is important to ensure that you submit all tax returns on time, including income tax, National Insurance contributions, and VAT returns.
Not understanding the rules around National Insurance contributions
As a small business owner, you are required to pay National Insurance contributions. It is important to understand the rules around National Insurance contributions, including the different rates for employees and the self-employed.
Failing to keep up with changes to tax laws
Tax laws and regulations are constantly changing. Failing to keep up with these changes can result in non-compliance and penalties. It is important to stay up-to-date with changes to tax laws and regulations to ensure that you remain compliant.
As a small business owner in the UK, understanding and complying with tax laws and regulations is essential for avoiding financial penalties and legal action. By avoiding common tax mistakes, such as failing to claim all allowable expenses and mixing personal and business expenses, you can ensure that you comply with UK tax laws and regulations.
Should I Hire A Small Business Accountant?
A small business accountant can definitely help you manage your finances more effectively. An accountant can provide you with expert advice on accounting practices, help you stay compliant with HMRC regulations, and ensure that your financial records are accurate and up to date.
In addition, an accountant can also help you prepare your taxes and provide you with tax planning advice. They can help you understand the tax implications of various business decisions and help you minimise your tax liabilities.
Overall, working with a small business accountant can be a valuable investment for any small business owner. They can provide you with the expertise you need to manage your finances more effectively, save you time and money, and help you grow your business.
Our specialist team of expert and highly qualified accountants are here to deliver everything you need to set up, operate and grow your business. Working with an accountant can help you save time and money, and can give you peace of mind knowing that your taxes are being handled properly.
Learn more about our Small Business Accountants Service
Small Business FAQs
What is the deadline for submitting a tax return in the UK?
In the UK, the deadline for submitting a tax return online is usually January 31st of each year. If you submit a paper tax return, the deadline is October 31st of the previous year.
Can I claim expenses from previous tax years?
Generally, you can only claim expenses for the current tax year. However, there are some exceptions, such as capital allowances, which can be claimed over several years.
What happens if I make a mistake on my tax return?
If you make a mistake on your tax return, you should inform HM Revenue and Customs (HMRC) as soon as possible. Depending on the nature of the mistake, you may be liable for penalties and interest charges.
Do I need to keep records of my expenses?
Yes, it is important to keep accurate records of all income and expenses. This includes records of any VAT paid or owed.
What is the penalty for late payment of VAT?
If you fail to pay your VAT bill on time, you may be charged a penalty. The amount of the penalty will depend on how much VAT you owe and how late the payment is.