Running your own business has plenty of advantages and being your own boss can bring with it plenty of positives. But, one thing you might dread as a business owner each year is filling out and completing your tax returns. As a business owner, you are responsible for completing your tax returns and completing a tax self-assessment form.
HMRC uses tax self-assessments to get information on your business and calculate how much income tax you should be paying. Rather than getting a traditional salary, business owners will use their business as a form of income instead, so this helps to work out how much you owe. Ordinarily, taxes are deducted from salaries, pensions and saving accounts, but if you are self-employed, this is not automatically deducted and the responsibility lies with yourself to get this information to HMRC.
If you are a new business owner, or even if you have owned your business for years, filling out your tax return can be daunting. It is a time consuming and complex process which requires organisation and preparation on your part, which understandably, as a business owner, you may not have much of! On that note, let's take a look at how you can prepare for tax return deadlines.
Get Your Business In Order
It's much easier to put together your tax return information if your business records are regularly updated throughout the year. The mistake that a lot of business owners make is leaving sorting out their accounts until the tax return deadline is looming. This is a particularly dangerous mistake to make, as it means that mistakes are often made and this can cause issues with your tax return.
If you don't have an accountant to take charge of your business finances, consider investing in their services to make the next year much easier. In the meantime, you should be using a separate business bank account to make transactions - if you use a personal bank account for your business, then this can get messy, fast. Whilst you can legally use a personal bank account for your business expenses, there are a lot of grey lines and they can be easily taken advantage of.
Know Which Expenses You Can Claim Back
If your business is a limited company, then you can claim tax relief on a number of different business costs, from phone bills and computer software to travel expenses and stationary. But, knowing what you can and can't claim tax back on will give you a much clearer understanding of what to fill out for your tax returns paperwork and can leave you with a better take-home pay package. As a business owner, you can only claim for expenses which you have incurred exclusively during the day-to-day running of your business. You can't, for example, claim dual expenses for personal and business use. An example of this is if you decide to extend a business trip for personal leisure reasons. You can only claim for the days in which you were there for business.
You can also claim back tax on things such as business life insurance policies you have taken out for your employees or yourself. As well as this, health insurance and private health care can also be claimed back as a business expense.
Register In Time
The first time that you submit a self-assessment tax return, you will need to register it with HMRC. You will need to let them know if you are self employed, a partner, or involved with a partnership, as well as if you work for someone else. Depending on your status, the process for your tax return form will vary. It's important to leave around 20 days for HMRC to process your application, so don't leave it until the last minute as you may then incur a fine.
Once you have registered, you will be given a UTR (unique taxpayer reference) which you will need to supply when you file your return. You can also choose whether you want to submit your self-assessment by post or online, but if you submit online then you will need to register for online return services first. Once you apply, it will take around a week for you to receive a code to access this service.