New tax year resolutions – which will you be making?
Cast your mind back to late January. Were you experiencing headaches? Red eyes? Trouble sleeping? You were most likely suffering the classic symptoms of taxitis.
Having burnt the midnight oil producing your tax return before the 31 January deadline you probably told yourself you wouldn’t leave it so late again this year. (Which is what you said last year…) So, with the new tax year starting on 5 April, here are some ways you can ensure that this time round your tax won’t be quite so taxing…
Realise you’re the problem
“The first thing you need to understand, is that you’re your own worst enemy, not HMRC,” says Rosie Slosek of One Man Band Accounting. “The process may feel difficult, confusing and contradictory, but the biggest problem is that most people think: ‘I really don’t want to do this’, so they put it off.”
Many people ignore doing their accounts or tax return until a rising sense of anxiety begins to take over them. Then they attack it in a blind panic, fearing the worst if they get it wrong. But give yourself a break, says Slosek.
“Set yourself a realistic deadline for finishing – mid-October is good. Work out what scares or bores you most about the process – and therefore what stops you from doing it – and just outsource that. It probably won’t cost you that much, and what you pay is tax deductible.”
If you can’t stand the whole process then hire an accountant. (If you set up a limited company then you’ll need one anyway). But you must remember there’s one crucial element that you can’t outsource – your legal responsibility.
The accounts or tax return – and therefore any mistakes they may contain – are yours, not your accountant’s. You still need to read the forms carefully before they are filed.
Stay on top of the paperwork
Get into the habit of doing your accounts throughout the year, rather than pulling them together at the last minute, as it could save you time, as well as money, in the long run.
One of the first questions the HMRC will ask a person or company it investigates is whether their books are kept up to date during the financial year. If they are compiled at the end of the tax year then the Revenue may use that to argue the records are unlikely to be accurate.
Many of us struggle to remember what we did last weekend, so (the Revenue will often argue) how can it believe your accounts if they were written months later?
Keeping a clean desk is admirable, but don’t throw away important paperwork. You should file all your bank statements, credit card statements and receipts, even if they don’t contain payments that you intend to set against tax. Online-only bank accounts often don’t provide you with paper statements, and you can’t search back further than 12 months, so it’s important to save your statements, either digitally or in hard copy.
If you are investigated by the HMRC it may sift through all your financial affairs, including your personal as well as business bank accounts, going back several years. You don’t want to have to wrack your brains about a cheque paid into your personal account three years ago if the taxman asks whom it was from and what it was for.
Seek the advice of an accountant throughout the year, even if you complete your tax return yourself. You may spend more in fees, but your accountant could save you money on your taxes.
Many seemingly mundane things, such as buying a new car (and how you pay for it) or how you pay yourself, could have big implications on your tax bill. If you don’t mention them to your accountant until months later then it could be too late for them to help you.
Celebrate when it’s done
Putting a post-tax dinner or trip to the cinema into your diary is a good way to focus on getting the darned thing done and will act as a reward for finally getting it out of the way. Then you can relax!
Creating a routine for doing what needs to be done will take a lot of the pain out of doing your taxes. Slosek says: “Understand what you need to do for your business, as the requirements can vary according to which industry you work in. But, rest assured, every year it will get easier.”
So that’s it from us. Which new tax year resolutions will you be making on 5 April..?
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At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.