When you’re first starting out, it could be said that tax is ‘hardly’ a priority for you. After all, you simply want to get into that elusive position where you’re earning enough to be taxed!
However, despite the current small scale of your business, tax is something that you need to get right from the outset. If you let your affairs build up over time, it’s going to be a costly and lengthy affair to untangle.
Bearing this in mind, we will now showcase some of the best ways to handle tax in your young, new business.
Make recording keeping your top priority
The saying goes that ‘time is money’, and nowhere is this more pertinent than in the world of business. The more time you spend on administrative tasks such as bookkeeping and record-keeping, the less time you’ll have to focus on making money.
This is why it’s so important to make a habit of recording all of your business transactions from day one. Not only will this help you to keep track of your expenses and profits, but it will also make tax season a lot less daunting. In fact, if you’re up to date with your bookkeeping, filing your tax return should be a relatively straightforward process.
Research every possible expense
As a small business, you’ll be entitled to a range of tax breaks and allowances. However, in order to take advantage of these, you need to be aware of them in the first place. This is why it’s essential to do your research and find out as much as you can about the tax system that applies to your business. While things like public liability insurance will always be a legit expense, some of the more niche costs might not be.
For example, if you’re involved in the world of property, and you operate as a sole trader, your mortgage repayments aren’t a straightforward taxable expense. There are all sorts of nuances like this throughout various industries, which is why a lot of start-ups will turn to a specialist to look after these affairs.
Understand each and every tax break available to you
As we’ve alluded to, there is a range of tax breaks and allowances available to small businesses. However, in order to make the most of them, you need to understand them.
The most common tax breaks available to small businesses are the Research and Development (R&D) tax credit and the Capital Allowances scheme. The R&D tax credit is an incentive offered by the government to help businesses invest in innovation, while the Capital Allowances scheme allows you to deduct the cost of qualifying capital expenditure from your taxable profits.
In truth, this is just the tip of the iceberg, and a combination of research and turning to the right professionals can help you to unlock umpteen tax savings in your chosen business.
Don’t ‘forget’ about your big looming bill
One of the biggest challenges for any small business is managing cash flow. This is especially true in the early stages when you’re often strapped for cash and working to break even.
However, one thing you can’t ‘forget’ about is your tax bill. If you neglect to factor it into your budget, you’re going to be in for a nasty shock.
Rather than letting this happen, it’s much better to plan for your tax bill from the outset. This might mean allocating a specific percentage of your earnings to tax, or it might mean budgeting for a one-off payment. However, whatever you do, don’t leave it until the last minute. Let’s not forget that there is no employer above you calculating this on a monthly basis anymore.