The tax season for 2019 in the UK is officially defined as the period between 6 April 2018 and 5 April 2019. Each tax season, all businesses, regardless of size, must provide their employees, contract workers, and others, with tax documentation that is required by the HMRC so that workers can file their tax returns. Unless an extension is requested, all tax paperwork must be postmarked or filed with HMRC by no later than 31 January 2020.
For small businesses, in particular, tax season can be quite challenging. The stresses of managing the day to day business can often be compounded by the needs to provide each employee with this legally required documentation. Take a look at these six tips by File Center DMS to help you process this year’s taxes.
1. Organisation is critical
Don’t wait until the last minute to begin your tax preparation work. Develop processes that can be leveraged year-round to make it easier to deliver your tax documents. A key task is to make sure that you have your personal bank accounts and business bank accounts separated. Also, do the following:
- Put estimated taxes into a separate savings account.
- Keep digital copies of your receipts. Most of us want a receipt organiser for tracking purposes. We want to track our reimbursable expenses, our tax deductions, our medical costs, and more.
- Log all travel expenses as they are incurred.
Take advantage of opportunities to stay organised throughout the tax year. The best time to do this is after your bank statement is available each month. To get started, set aside a couple of hours to review your documentation and make sure everything is in order. Taking the time to do this now can be incredibly time-saving as that month’s activities are likely still fresh in your mind. When you wait until the end of the year, it is far more likely that you won’t be able to remember precisely when various purchases were made. Take this time also to conduct a reconciliation of your bank accounts to make sure that figures match and everything is in order.
2. Leverage technology and go paperless
Leverage a document management system (DMS) to integrate your tax requirements. DMS software can cut down on data entry and can link to your tax software, which saves you significant time and efforts.
Not only is this great for the environment, but a paperless organisation system can make it much easier to locate the information you will need for your taxes. DMS tools are perfect ways to develop a paperless office. Tools that provide optical character recognition (OCR) save a remarkable amount of time when searching for key files and pieces of information.
As part of your effort to go paperless, ask your vendors for options to receive your bills electronically instead of through the mail. Most vendors now offer the ability to download an invoice from their website or receive delivery of invoices through email. This process saves time as you can take these files, already in digital format, and move them into your DMS filing system for easy accessibility later.
Another great tip is to download your bank statements each month and save them into your DMS. Receipt of paper bank statements in the mail increases your risks of identity theft, and not to mention, they often take up a lot of paper and space once put into a manual filing system. By taking control of your bank statements each month by accessing them directly from your bank’s site and moving them into your DMS, they will be easily filed and labelled for quick reference at any time that they are needed throughout the year. If your business is ever subject to an audit, this will also make the process easier for your auditor.
3. Use a business credit card that provides an annual expense summary
It’s critical that business owners keep their banking information separate from their personal accounts. Most credit card companies offer expense summaries in January of each year. If your business credit card was used for all of your expenses, this can be a great way to cross-reference your expenses for use at tax time. And, if you need a summary at any other point of the year, most credit card companies can provide this too.
4. Stay up to date on current events
Follow your small business community on relevant social media channels, and tune in to articles and videos posted by financial personalities who often talk about trends and new requirements for businesses.
5. Know up front if you will do your own taxes or if you will hire a professional
Many small business owners prefer to do their own taxes, and in fact, over 90% believe that they are able to file their taxes correctly. This is all the more possible when you have properly documented and maintained your files and receipts throughout the year. However, you might not have the time or the expertise to carry out your business taxes, so you might have to hire an accountant to help. Take time to decide what the best option is for you and your business and do this before the tax season starts.
6. Getting started on your taxes
If you will be filing your own taxes for your small business, get started early. It is easy to lose focus and get pulled into day to day business needs, no matter how organized you are. By starting early, you can ensure that you have plenty of contingency time to get your taxes in order, well before the January deadline.
As you prepare, make sure all of this information is ready and this includes previous year business expenses. This is much easier if you use accounting software that is integrated with your DMS. Know your expenses for all of the following:
- Office supplies
- Business equipment and technology investments
- Donations or sales proceeds from any business equipment that you no longer own
- Payroll expenses, if you have employees
- Proof of retirement plan contributions
- Technology investments
- Taxes already paid
Once you are well organised, set aside dedicated time to complete the online tax forms. Many small business owners find it easiest to do this on a weekend when there is less day to day business interruptions. Tax time doesn’t have to be difficult. Once you find a system that works for you, look to replicate it year after year instead of reinventing the wheel.