Monday, 11 March 2013

The end of the tax year looms...

Hands up if you're super organised and prepared for the end of the accounting tax year? I won't lie, I'm not exactly the most organised business owner I know but I have learnt to become more prepared for my tax return by keeping up to date with all incomings and outgoings and more importantly keeping track of all those receipts.

It might sound obvious to many people but running a cake business isn't all about making beautiful cakes and having lots of baking fun in the kitchen. Ask any professional baker what their normal hours of work are and I can guarantee that like me, they regularly become acquainted with 2am finishes!

Managing your actual workloads is difficult enough but when it comes to getting organised for the end of the tax year then I can assure you that it pays to get your accounts in order sooner rather than later.

As a business owner who uses an accountant, I can't recommend them (well mine in particular!) enough. Yes, there is a fee but they are worth their weight in gold. I am terrible with figures and whilst I could submit my own tax return, there is a certain sense of relief that someone else is dealing with HMRC on my behalf. It's also exceptionally useful to know that your accountant knows how to claim for things like electricity working from home etc as these allowances can often be overlooked as they seem quite complicated to calculate.

If you are doing your own accounts then take all the advice the HMRC offers. They have a variety of free advice options and whilst many of us shudder at the thought of contacting them, they really are there to help us through the tax minefield that is your tax return.

The key to administering your own accounts is being prepared. My first year in business saw me sat up till 1am mid way through January scanning through receipts that were half faded and covered in coffee stains. It's no surprise that I employed my accountant about 2wks later but looking back I realise that if I had just taken some time each month to organise my receipts and tax book then things might have been a lot easier.

I now have this snazzy diary which has a folder option after each quarter so I just pop all my receipts/order confirmations into the folder pockets and input them into my tax spreadsheet after 3mths. Each receipt is given a ref number and then archived in case of a tax audit. It's still not a job I relish, but it makes life easier to be more organised.
My top tips for preparing your own accounts are:
  • Create a system for monitoring all of your incomings and outgoings. I use an excel spreadsheet and as long as it monitors all expenditure and money transactions then any system will suffice. If you use an accountant they should provide a template for you which makes life easier!
  • Set aside money for your tax bill. This might seem obvious but that tax bill at the end of January isn't always easy to find so start saving now! HMRC have a handy calculator to help you work out how much to save each month.
  • Know your tax allowances. Being self employed makes tax a little more complicated but there are certain allowances we are entitled to. Knowing what you can/can't claim for can help bring that tax bill down but there is a time limit on some so check out the HMRC site for more details.
I have always been an advocate for using an accountant and I remain fixed on that but good luck if you're approaching your 'year end' and I hope my post inspires you to get more organised and avoid those stressful nights on the HMRC website in late January...
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