Preparing for the End of the Tax Year - Image

Preparing for the End of the Tax Year

As a business owner, it is your responsibility to keep on top of your tax arrangements, particularly as the end of the tax year approaches. By keeping on top of your tax arrangements, you’ll avoid any last minute scrambling around for receipts and, if you prepare properly, you’ll be able to avoid any headaches and sleepless nights. In this post, we take a look at all of the basic information you need to know so you can properly prepare yourself for the end of the tax year.

What is the Tax Year?

The personal tax year runs from April 6th – April 5th the following year, which means that the end of this tax year will be April 5th 2016.

If you’re a business owner who is a sole trader or a partner in a partnership, then the taxman effectively treats you as being self-employed. When you register as such, you’ll have to fill in a Self Assessment tax return for that year. There are two separate deadlines for this:

  • Paper copy: October 31st
  • Online copy: January 31st

You may decide to start trading as a limited company. When you do this, you essentially create a separate legal entity or ‘person’ that’s taxed separately to yourself and any other business owners. If you set your company up in this way, you’re also liable to pay corporation tax for the ‘financial year’, or, ‘fiscal year’. This runs from April 1st – March 31st.

If you’re a director in a company, it’s important that you still keep the relevant dates for the personal tax year in mind, too. This is because all directors are required to complete a personal tax return each year.

How Should I Prepare for the end of the Tax Year?

The main mistake that business owners make when it comes to tax returns is believing that everything should just be done as the deadline nears. This isn’t the case and, if you prepare thoroughly and regularly throughout the year, you’ll find it far simpler.

So, ensure to file your paperwork as soon as it arrives. Otherwise, you’ll have to sort through it all at once at the end of the year. As a self-employed business owner, you’ll be taxed on profits after deductions for expenses, so it’s important that you know what your expenses are in detail so that your tax bill is accurate. As your business first gets off the ground, you may not have many transactions, but these will soon begin to mount up, so it’s best practice to keep on top of them throughout the year.

Keeping on top of receipts and invoices is simple, too. Put all of these documents into a lever arch file with folders marked ‘incoming’ and ‘outgoing’. This way, everything will be in place when it comes to filling in your forms.

End of the Tax Year Checklist

  • Keep your receipts. By keeping all receipts, you’ll know you haven’t undervalued your business costs.
  • Make sure you’re organised in advance. Have a set system for storing receipts and ensure that everyone knows how it’s used. If you log transactions as they happen, you’ll find it much simpler to complete your tax return as you’ll be certain that nothing’s missing.
  • Seek professional guidance. As your business grows, transactions will become more complex. Expert guidance and accountancy can help save your business money.

Know your Deductions and Entitlement

Finally, remember that you can deduct certain entitlements from your tax bill. This includes any money you’ve spent nurturing your business. The money you spend doing this can take a wide variety of forms, including: using your home as an office, any travel expenses, taking clients out for a meal and phone bills (among other things).

If you earn £82,000 or less, then you can complete your Self Assessment tax return through cash basis accounting. To do this, you’ll need to keep a record of all business income and expenses throughout the tax year. Crucially, however, this does not include invoices that have not been paid, meaning that you’re only taxed on income you’ve actually received.

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