Tuesday, 7 January 2014

Don't make January a taxing time...

The January bookkeeping blues are looming, as small business owners across the UK are getting their books in order to submit tax returns by January 31. The penalties for late submission and payment are severe, with a fine of £100 levied for being just one day late. Don’t wait until the last moment to submit as well, as the Government Gateway may crumble under the pressure and you may be left fighting against the clock, and lose.

Try to make the practice of ‘keeping good books’ your New Year’s resolution and follow these simple steps to take the pain away:

•             Get a head start with your accounts. HMRC states: “You must keep records of all your business transactions.” Getting into the habit of keeping good bookkeeping records is essential to the smooth running of every business, no matter how big or small. It’ll amaze you to hear how many people have not budgeted for their annual tax payment. Don’t let your tax obligations take you by surprise, but instead budget for the ‘worst’ (or best, as you’ll be operating a more successful business!) case scenario.

•             Do everything you can to take the surprise out of tax planning. Let your accountant and accounting software do the hard work for you. As well as allocating time each week to review and update the books, small business owners should set time aside each week to go through the books and ensure that their accountant is kept in the loop, particularly about any unexpected changes in the business’s fortunes in order to avoid any surprises when tax returns need to be submitted.

You still have time to make this January’s deadline, so here’s what you need to know:

-              You have already missed the October 31st deadline for submitting your tax return by post; you must instead submit your tax return online by January 31st 2014.

The penalties for late returns are pretty steep and the longer you delay, the more you’ll have to pay:

-              One day late: A fixed penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.

-              Three months late: £10 for each following day – up to 90 days, maximum £900. This is as well as the fixed penalty above.

-              Six months late: £300, or five per cent of the tax due, whichever is the higher. This is as well as the penalties above.

-              12 months late: £300, or five per cent of the tax due, whichever is the higher. In serious cases you may be asked to pay up to 100 per cent of the tax due instead. These are as well as the penalties above.

The last thing anyone would want is to be burning the midnight oil in a frantic rush to get a tax return submitted by the deadline. So, speak to your accountant or bookkeeper to find out how you can help make January a less taxing time.