Tax returns can be a daunting time of the year especially if you haven’t undertaken this procedure before. As the recession hits more people, those that were in employment are now turning to the self-employed sector and some with no idea as to how to file for annual tax returns. We have included Drummond’s 5 tips to remember for your annual tax returns.
1. Do I have to file a tax return?
If you are an employee you usually need to be earning a certain level of income, benefits or income that isn’t taxed, before it is necessary to file a personal tax return – although there are different rules for business owners. If you are either an employee or director in a business that is a partnership, sole trader or a limited company, then you generally do have to complete a tax return.
2. Keep a record of every expense
One of the biggest areas that small businesses get caught out is when they don’t keep record of every expense throughout the year. As long as you keep good records, your tax return should be pretty straight forward and you can claim for expenses that you have spent money on for example business travel – including petrol, train and bus fares and also taxis. Although you can’t claim for your everyday commute from home to work and back again. You can also claim for office expenses like rental space.
If your small business is set up at home then you can claim for several of your home running costs. Usually you will spend a third of your time working from home so just work out a third of your bills e.g. electricity, gas and water – these are the expenses you can claim for in your annual tax return if you work from home.
3. Exclude VAT
If your business is registered for VAT then you should remember that the figure for trading income will be your sales exclusive of VAT. If your business is registered on the Flat Rate VAT scheme then this figure would be your sales net of Flat Rate VAT.
4. Check on your accountant
If you have an accountant make sure that they are on the ball and ready for the tax return deadline at the end of January. If you don’t have an accountant and filing your tax returns this year has been an absolute headache then phone Drummond and see what we can do for you to make your business better prepared for the tax year ahead.
5. Save money
It is a good idea to keep money saved for the next tax year. Make a record of your business’s profits and your tax liability, this will give you the chance to see what you might owe and allow you to put money away throughout the year to make sure that cash-flow doesn’t become a problem. This simple strategy could make a different between stopping your business from going under and seeing it grow and prosper.
Remember tax returns don’t have to be taxing. If you are organised throughout the year either by hiring an accountant or just keeping tabs on all your business’s expenses then the process of filing your annual tax returns will be an easy process. If you think your business could do with the help of an accountant, get in touch with Drummond and see how we could help you.