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Top 10 tax tips for small businesses

January 15, 2014

Tax isn’t the most exciting part of running your own business, but it is an issue that you will have to tackle at some point.

To help you to quickly get to grips with the subject, here are some handy tax tips based on our findings of working with small businesses over the past decade, and from our own personal experience at the ByteStart team.

1. Make sure you submit your accounts, tax returns and Companies House paperwork (if you are a limited company) accurately, and on time to avoid penalties and increase the chance of an HMRC investigation.

Remember that, even though your accountant is likely to submit information on your behalf, the company’s directors are ultimately responsible for any errors or missed deadlines.

2. Maintain accurate records at all times, and keep all your invoices and receipts in a safe place. You should keep all business records for six years according to HMRC.

3. Make sure you claim for all the allowances you and your business are entitled to – from capital expenditure, to claiming help with your business rates.

4. Online accounting software packages such as FreeAgent and SageOne can save you hours in time, and make your accountant’s life easier at year end. You’ll also be able to access your records at any time, from anywhere.

5. If you are running a business from home, you can claim back a fixed nominal sum each year, or claim expenses for a proportion of your home-related costs.

6. If you run a limited company, you must ensure that you only declare dividends from retained profits. Heavy penalties exist for companies who declare dividends illegally.

7. If you are VAT registered, ask your accountant if you would be better off using the Flat Rate VAT Scheme, which also provides a further percentage reduction during the first year following registration.

8. Don’t forget to claim for the costs incurred as a result of setting up your business, such as company formation costs (if applicable), or any equipment you may have purchased.

9. Always set aside future tax liabilities to ensure that you do not come unstuck at tax deadline time. We recommend setting up a separate deposit account for this purpose.

10. A good accountant may become your most important advisor, and could save you money. An accountant will also be able to advise which business structure will suit you the best – sole trader, partnership, or limited company.

11. And finally, a bonus tip. Make sure you look at setting up a salary sacrifice scheme. This can help you to reward staff, including yourself, and cut the amount of tax that both, your employees, and your business pays.

More help

For more helpful tips and advice on tax and accounting issues for small business owners, check out some of our most popular guides on the subject;