BUSINESS ADVICE • 28 APRIL 2023 • 6 MIN READ

Kickstart your financial year with these 7 tax tips

2 business owners starting the financial year off right

SECTIONS

1. Open a business bank account

2. Know your tax obligations

3. Plan ahead

4. Know your key dates

5. Keep all your records

6. Invest in software

7. Hire a professional

The start of the financial year is an exciting time. It can be a great opportunity to refresh, regroup and focus on your goals as a business owner. We've put together a list of seven tax tips to help you start the year on the right foot and set yourself up for success in the year to come.

1. Open a business bank account

If you’re a sole trader, you don’t necessarily need a separate business bank account. However, if you’re operating your business through other structures (e.g., company, trust, or partnership), these are separate legal entities so will need to each have a bank account of their own.

For example, if you’re changing your business structure from a sole trader to a company in the new financial year - or if you’re starting a business via company, partnership, or trust structure - you need to open a business bank account. To learn more, check out our article on opening a business bank account.

2. Know your tax obligations

Your tax obligations are one of the most important things to stay aware of as a business owner. These can differ depending on your situation.

For companies

If you operate your business through a company structure, you’re responsible for:

Registering your company: if you wish to start a new company (or transition from a sole trader to a company) you must register with Companies House - you can do this online or by post. You’ll also need to pay a registration fee and likely register a company for PAYE, as you’ll be employed as a director with a salary. Registering for corporation tax with HMRC becomes a possibility at this time.
VAT: UK businesses must register for VAT if the total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold), or if you expect turnover to go over £90,000 in the next 30 days. You are then required to charge VAT on sales and file VAT returns (usually on a quarterly basis).
Filing your financial statements for (most) owner-managed limited companies: the filing deadline for your financial statements is 9 months after your year-end. These can be filed online or by post - just keep in mind late filing will result in a penalty!
Filing corporate tax returns: Companies are required to file corporate tax returns annually. This deadline is 12 months after the end of your accounting period, so again be sure to file your tax return on time to avoid penalties!
Paying taxes on time: The deadline for paying your tax liability is 9 months and 1 day after the end of the accounting period, so it’s a good idea to get your tax return prepared by this date.

For sole traders

If you operate your business as a sole trader, you’re responsible for:

Filing your self assessment tax return: As a sole trader, you need to file a self assessment tax return with HMRC by the 31st of January following the end of the tax year. Your 22/23 tax return is, therefore, due on the 31st of January 2024.
Paying your income tax and national insurance bill: If you have been trading for more than one year and your tax bill is more than £1000, it’s important to make payments on account towards your tax bill. Typically, the first is on the 31st of January during the tax year, and the second is on the 31st of July following the tax year. The balancing payment (or settling your liability in full, if you haven’t made any payments on account) is due on the 31st of January following the end of the tax year (the same day as your tax return is due for filing). The tax rate depends on your total income for the year and personal income tax rates apply.
VAT: UK businesses must register for VAT if the total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold), or if you expect turnover to go over £90,000 in the next 30 days. You are then required to charge VAT on sales and file VAT returns (usually on a quarterly basis).
Declaring other income: You’re required to declare any other income you receive in your self assessment tax return (such as rental income, dividends, or interest).

If you’re unsure which business structure to choose, we have an article talking about common business structures in the UK. The start of the financial year is a good time to review your position and ask your accountant whether you should switch to another business structure.

3. Plan ahead

Review business structures

The business structure you set yourself up with will have a huge impact on how your business runs, and will likely be one of the first steps you take when starting out. Keep in mind you may benefit from other structure types as you scale up your business.

Your business structure can change along with your needs as a business owner. You can always discuss with your accountant if your business structure is optimal for your current situation.

Review VAT position

As mentioned, you must register for VAT if your VAT-taxable turnover for the last 12 months is over £90,000, or is expected to exceed this in the next 30 days. Review your VAT position in the new financial year to see if you need to register for GST.

Claim business expenses

A key component of planning ahead is knowing what you can claim tax deductions for. As a rule of thumb, you can claim only on an expense incurred ‘wholly and exclusively’ for the purposes of the trade. These may include:

Home office expenses
Vehicle expenses
Expenditure of capital assets
Travel expenses
Entertainment expenses

Setting money aside

To avoid problems with your cash flow you need to set money aside for taxes (such as VAT, corporation tax, and income tax). As there are so many variables to consider, it’s very difficult to provide a set percentage of the money you should save. It’s best to assess the situation with your accountant based on your marginal tax rates.

4. Know your key dates

Important key dates for your business will depend on what type of business structure you are using, and if you are a company it will depend on your financial year-end.

Our key dates calendar will help you stay on top of these dates (and avoid any late filing penalties or interest!).

5. Keep all your records

One of the most important (and often overlooked) tax tips we can give is to keep your records. HMRC requires you to retain your accounting records (such as invoices, receipts and bank statements) for at least 6 years if you are operating a company, and 5 years if you are operating as a sole trader.

You can either store your records in a physical location or in a cloud-based software such as Google Drive or Xero. Make sure they are easily accessible and understandable in the event of enquiries or tax inspections.

Maintaining good record-keeping practices can help you avoid costly mistakes or fines. You’ll also have a clearer understanding of your business's financial performance, helping you plan ahead.

6. Invest in software

Accounting software can be a game-changer for small businesses. It allows you to automate time-consuming and complex financial tasks, such as managing invoices to generating financial statements and tax reports. Cloud-based software allows you to work on your finances from anywhere, and collaborate with others in real time.

Investing in software helps to save money (and time) in the long run, as efficient management of your financial data means you’ll improve the accuracy of your information and have more insight into how you’re tracking.

Our pick of the bunch is Xero - learn more about how Xero enriches your business here.

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7. Hire a professional

Let’s face it - filing tax returns probably isn’t the reason you became a business owner. Hiring a finance professional can save you a lot of time and stress, freeing up your schedule to focus on your business or charge billable hours.

However, a good accountant can help with far more than helping you manage your taxes. At Beany, we’re not just there for you at the end of the tax year. Your dedicated accountant will work alongside you throughout the financial year providing you with all the services and support you need.

If you have happened to miss the deadline for filing your tax return, your accountant will be in touch to remind you to do so. They will be able to help with setting up a plan to get things sorted.

Put these tax tips to good use with Beany

Start your financial year in confidence with Beany. We have a dedicated team of certified accountants and a support team to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down barriers and get things done. Looking out for you is what we are all about - get started for free today!