Running a business is no walk in the park. Between managing jobs, keeping customers happy, and finding time for yourself, your accounts can sometimes end up at the bottom of the to-do list. But when tax season rolls around, this can lead to some nasty surprises. No one wants a big, unexpected bill from HMRC—especially when cash flow is already tight.
The good news? A bit of planning can make all the difference. Here’s how you can avoid tax shocks and keep your business finances in top shape.
1. Set Money Aside Regularly
One of the easiest ways to avoid tax surprises is to save a bit of money every time you get paid. A good rule of thumb is to set aside 20-30% of your income for taxes. This might seem like a lot, but it’ll cover your income tax, National Insurance, and, if applicable, VAT.
Top Tip: If your income fluctuates, save a higher percentage when business is good. This will give you a cushion for quieter months and help avoid any panic when tax bills are due.
2. Keep Track of Income and Expenses
When it comes to taxes, good record-keeping is your best mate. Having a clear picture of what you’ve earned and what you’ve spent makes filing your tax return much simpler.
- Log Your Income: Whether you’re getting paid by invoice, cash, or card, keep a record of every penny that comes in.
- Track Your Expenses: Every business expense—from fuel and tools to office supplies—could reduce your tax bill. Make sure you log them as you go.
- Save Those Receipts: Go digital if you can—snap a quick photo of receipts and store them in a folder. This makes finding them at tax time a doddle.
3. Know Your Tax Deadlines
Missing a tax deadline can not only lead to penalties but also throw your business finances into chaos. Here are some key dates to remember:
- 31st January: Deadline for online self-assessment tax returns and payment.
- 5th April: End of the tax year.
- 31st July: Second payment on account if you’re self-employed.
- Quarterly VAT Deadlines: If you’re VAT registered, keep track of your specific submission dates.
Pro Tip: Set calendar reminders a month before each deadline. This gives you time to get everything in order and avoid any last-minute panic.
4. Understand Your Allowances
One of the best ways to reduce your tax bill is to make the most of allowable expenses and tax reliefs. Many business owners don’t realise what they can claim for, which could mean paying more tax than necessary.
Common Allowable Expenses Include:
- Tools and equipment
- Travel costs (including mileage)
- Business-related phone bills
- Office expenses (stationery, postage, software)
- Marketing and advertising costs
If you’re not sure what you can claim, it’s worth chatting to an accountant—getting this right can make a big difference to your final tax bill.
5. Stay Organised All Year Round
The secret to avoiding tax surprises isn’t just about what you do in January—it’s about staying organised all year. Building good habits now can save you stress, time, and money later.
- Regularly Update Your Books: A quick 10 minutes each week can keep your accounts in order.
- Review Your Cash Flow Monthly: This helps spot any financial gaps early.
- Use Simple Accounting Tools: You don’t need anything fancy—just something that helps you track income, expenses, and tax owed.
If It All Feels Too Much: There’s no shame in asking for help. Accountants can take the load off, giving you peace of mind and letting you focus on running your business.
What to Do If You Get a Tax Surprise
Already facing a tax bill you didn’t expect? Don’t bury your head in the sand:
- Contact HMRC: You might be able to set up a payment plan to spread the cost.
- Review Your Accounts: See if you’ve missed any expenses that could reduce your bill.
- Get Professional Help: An accountant might be able to spot savings you’ve overlooked.
Ready to Make Tax Time Stress-Free?
At Buzz Accounting, we understand how hard it is to juggle everything when you’re running a business. We’re here to make your accounts simple, help you avoid tax surprises, and save you from last-minute panics.
If you’d like to learn more, drop us a message or get in touch. We’d love to chat about how we can help make your accounting a doddle—so you can focus on what you do best.