5 Tips for Business Owners to Avoid Common Tax Mistakes

by | Jun 27, 2019

5 Tips for Business Owners to Avoid Common Tax Mistakes

Tax – does it make you anxious? Do you have real clarity on your business financials and tax obligations? If you bury your head in the sand at the very sound of HMRC and tax filings, it pays to take some time to organise your financial records and be proactive in your tax planning.

Here are my top 5 tips that will help you avoid common tax mistakes that are often overlooked and lead to a whole lot of worry and pain:

Do not wait till the end of the year to think about tax

Every business decision, from purchasing new equipment to hiring part-time help, can have tax implications. That’s why it’s critical to work with a tax specialist on a continual basis and not just adhoc. This will maximise tax efficiency and minimise tax liabilities.

If you don’t you may face unexpected tax bills that you didn’t account for in your cash flow forecast. Big tax bills can result in business failure.

Accountants are your most trusted business adviser and you should check in with them regularly to ensure they have reviewed your accounts.

Keep your financials organised and up to date

organized business papers

Good recordkeeping, and the visibility that comes with it, is the key. It is imperative that as a business owner, you have absolute financial clarity of your business performance.

Spreadsheets are ok as an additional tool but they are limiting. You need to invest in software and tools that will give you accurate, real-time information of your financials so you can make strategic decisions. When you don’t see your numbers live you cannot identify issues that may significantly affect your future business success.

With powerful accounting tools, you can expect to benefit from simplified invoice and receipt processing, expense tracking facilities to spot any unnecessary subscriptions and reliable business forecasts to help obtain cash for development. All of these benefits allow for quick decision-making and ultimately provide you more time to spend on growing your business.

We recommend Xero or Quickbooks to keep your financials organised and up to date. It’s the only way to make sound tax and cash decisions.

There is no need to estimate any numbers

withholding tax papers

So many business owners do not have a true understanding of their financials. Your numbers will tell the story of your past, present, and potential future. If you estimate what your numbers are you’ll never hit your growth targets.

To minimise tax exposure use mobile apps to help you stay completely accurate and to help you track expenditure and business mileage etc. Before receipt keeping software it wasn’t uncommon to meet business owners with receipts in a shoebox, bills scattered across desks, and electronic files in email folders. If this is you we recommend Receipt Bank.

Poor bookkeeping can lead to additional mistakes like intermingling personal and business expenses or estimating work-related mileage and costs.

Imagine never having to touch a paper receipt again. Throw away that shoebox in your bottom drawer and stop paying your accountant to copy and paste the details from each receipt into your accounting system, or if you are actually doing this yourself get your Sunday nights back!

Save for upcoming tax liabilities

To ensure you do not fall short when the tax obligations become due get in the habit of saving a certain percentage of your profits in a separate bank account. These funds should not be seen as a reserve or a backup for business spend. They are exclusively for tax bills.

When you fail to save for tax liabilities you may not have enough cash to pay the bill. This can result in massive fines or even business failure if you run out of cash and can’t pay staff and suppliers. Don’t let yourself get caught out by tax liabilities – plan ahead!

Seek help from the experts

man reading about expert's secret

Business tax obligations can be complex and are always evolving. Many business owners avoid their finances because they don’t understand what the numbers mean. Achieving financial clarity is essential if you want your business to beat the 96% UK business failure rate. You need a finance expert that will actively support your growth vision.

Accountants will help with annual reporting but also with strategies and tactics that will optimise your future tax position.

Apart from income tax, also consider business tax and relevant reliefs and how they can work in conjunction. Ask your tax advisor to undertake a tax review of all your tax affairs. There are always additional ways to be more tax efficient whether it be for remunerating yourself or staff, company cars or investments.

That means putting systems and processes in place to get a handle on the financials, and seeking help from a tax specialist or financial advisor on a regular basis.

Overall, we believe that every business should pay the minimum amount of tax required, so you have the maximum amount of cash to reinvest and grow your business. You should follow these 5 tips to ensure your tax filing is correct and you avoid the most common tax mistakes.

However, tax law changes daily. If you haven’t had an impartial, tax qualified accountant review your numbers in detail with reference to your personal, business and investment situation you are not getting proper tax planning.

We can guarantee you will pay the minimum tax possible by having a Chartered Tax Advisor review your numbers, and use software to ensure we don’t miss anything.

At the end you’ll get a detailed tax diagnostic report which outlines all the areas you can reclaim past paid tax, and reduce your bill going forward.

Get FREE TAX Review

How can we help?

We work with amazing businesses across the UK and beyond.

Give us a call to speak to us now, or request a call back or fill out our form and a member of our friendly team will get back to you within 24 hours.

Telephone: 0330 403 0010
Email: hello@growfactor.com

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