SME owners: File your tax return before the 31st of January deadline to avoid any unexpected costs, advises expert
Last year, HMRC reported that almost 1.8 million Self-Assessments were filed late, equating to 15% of the total expected to be filed.
Going into 2022, small business owners and self-employed entrepreneurs will want to continue to focus on their post-pandemic recovery, and may find their finances are seriously impacted if they fail to file returns on time.
Small business, sole trader, freelance and entrepreneur accounting experts at The Accountancy Partnership are urging self-employed people to turn their thoughts to tax returns well before the January 31st deadline to avoid potentially business-damaging penalties.
Lee Murphy, managing director at The Accountancy Partnership, said: “If you are self-employed, it is important to start thinking about filing your tax return now. It will ensure you have enough time to work through the form, and can seek professional help if you need it before accountants get too busy in the run-up to the deadline. Late filings incur a 5% penalty, which can be devastating in some cases.
“To complete your return, you will need your Government Gateway login and Unique Tax Payer Reference to access the forms. You will also need all your relevant accounts, receipts, bank statements and paperwork. Gather these together before you start filling in your tax return to simplify the process.
“If all your important documents are kept in a paper-based system and are generally difficult to sift through, it might but worth adopting a digital bookkeeping system to save time and make files more accessible. Research we conducted earlier this year found that one in 10 – roughly 600,000 – small business owners store essential documents in a shoebox or drawer.”
In addition to filing early, Lee emphasises the importance of claiming back business expenses and the tax benefits that come with it.
Lee continued: “Small business owners and the self-employed are often hesitant about claiming their full expenses, but this can mean paying more tax than you should. Two thirds (65%) of SMEs admit failing to claim expenses at some point, with some of these failing to claim in excess of £10,000. As long as claims are reasonable and a direct result of business, you should put them on your return to reap the tax relief benefits.
“It can often be difficult to interpret the advice from the HMRC when filing your Self-Assessment tax return, so it is advisable that you seek guidance from a finance professional to make the process less confusing and time-consuming, giving you more time to focus on your business. By asking for help, you reduce the possibility of any miscalculations or fines which, after 18 months of difficulty, is the last thing self-employed workers need.”