Tax may not be the most exciting subject, but a lot of business owners are leaking unnecessary money by failing to handle their tax obligations effectively, or by missing out on some of the tax breaks that are available to them. As you know, every little counts, and this is even more so the case for start-ups and small companies. Keeping that in mind, take a look at my top tax tips below because being scared of the tax system is putting way too many people off, especially women!
Know your VAT
There is only one place to begin, and this is with VAT, as this is an area where many business owners are losing out. Not only do you need to ensure you are paying the right amount, but you also need to select an accounting scheme that is right for you.
There are several different options available, and one that is particularly good for start-ups and small businesses is the Flat Rate VAT scheme. As you may gather by the name, you will pay a single, flat rate of VAT on your turnover. The amount is dependent on your industry. For instance, if you have an IT consultancy firm, you will pay 14.5 per cent, however, if you own an estate agency you will pay 12 per cent. You will then pay the percentage that is applicable to your industry, and you can keep the difference between the VAT you charge your customers, which is typically 20 per cent. In your first twelve years of registration, you are eligible for a one per cent discount from HMRC. This is something your accountant will be able to assist with.
The importance of this cannot be stressed enough. However, a lack of organisation is still one of the main reasons why so many small business owners end up paying more tax than necessary. You need to ensure you have clear and organised copies of all your accounts. If you do not keep proper supporting records, you could find that your expense claims are disallowed by HMRC. Small business accounting software is very helpful in keeping everything organised effectively.
Deduct taxes relating to travel and events
Whether you are hosting a training event, attending a client meeting, or making a trip to buy some equipment for your company, you will be able to deduct all costs that are associated with this when it comes to fulfilling your tax returns. This includes the likes of mileage using your own vehicle, public transport fares, airline expenses, parking, tolls, congestion charges, hotel stays, meals and subsistence expenses, for instance, lunch while on the move.
Just be mindful that you can only put the likes of hotels through the books if you have had to stay away from home. Moreover, there is a £5 allowance for overnight stays in the UK in the form of personal incidental expenses (PIEs), and if you are overseas this will increase to £10.
Deduct office equipment and furniture
You need to ensure that you deduct everything you buy for office purposes, and you will need an invoice that is in your company’s name for record purposes. This includes the likes of printers, computers, stationery, office furniture, fixtures and fittings.