Small businesses should move money to interest bearing bank accounts

According to a new poll, just 4 in 10 small businesses set aside sufficient funds to cover their corporation tax liabilities. Even when SME's do save correctly, around 44% keep the money in non-interest bearing current accounts, rather than opting to transfer their corporation tax liabilities into a savings account until payment is due.

These are the findings of a YouGov poll commissioned by Alliance & Leicester Commercial Bank.

Given that the small firms corporation tax rate goes up in April 2008, then again in 2009, the Bank suggests that it is important that small companies do plan in advance to meet the growing SME tax burden.

The poll also revealed a worrying trend for businesses to leave financial and tax planning until the last moment. Just over one third of those questioned (35%) are waiting until closer to their specific deadline before making preparations. But with penalties and interest charges for companies that miss their payment date, this can be an expensive mistake to make.

For some companies, they simply cannot afford to settle their corporation tax liabilities - a worrying 19% of companies that have not set aside extra funds say they can’t because of the number of late payments owed to them at any one time.

Steve Jennings, Director of Business Banking at Alliance & Leicester Commercial Bank, said:

“Good advice to any small business owners is to make their cash work harder for them by putting funds aside throughout the year or deposit year end profits in an account that offers quick access and risk-free high levels of return.”

Alliance & Leicester Commercial Bank has a market leading instant access deposit account for businesses with rates almost double those offered by the Big Four banks. The Business Instant Reserve account offers market leading interest rates and tracks the Bank of England base rate. There is no minimum balance and deposits are free and unlimited.