With the aid of an accountant you can save your business valuable money and time in the long run. Such savings come from the reduced level of risk of human error and the avoidance of late filing penalties from HM Revenue and Customs due to missed tax deadlines.
You do not need the hassle of managing your own bookkeeping. Particularly when you need to dedicate most of your energies to training and empowering staff, developing and improving your products or services and improving your firm’s bottom line.
When juggling all the above, it is not surprising that errors can creep into your accounts. Below are some of the most common errors that professional accountants find during preliminary reviews of small business’ bookkeeping habits.
Overdue self-assessment tax returns
When it comes to self-assessment tax returns, there are multiple deadlines and responsibilities for sole traders and small business owners to be aware of. You must file your tax return on time to avoid a late filing penalty. Furthermore, you must pay the tax you owe on time to avoid incurring additional fines and interest on your bill.
In most cases, the latest date to file a tax return for the previous tax year is 31st January. For example, the deadline for 2021/22 tax returns will be 31st January 2023. Furthermore, any tax due will also be payable by this date too.
The penalties for late filing are as follows:
- 1 day late – Automatic fixed penalty of £100. This applies even if you have no tax to pay or you have paid the tax you owe on time.
- 3 months late – £10 per day up to a 90 maximum of £900.
- 6 months late – £300 or 5% of the tax due, whichever is higher.
- 12 months late - £300 or 5% of the tax due, whichever is higher. In serious cases, you may even be asked to pay up to 100% of the tax due instead.
The penalties for late payment of tax bills are as follows:
- 30 days late – 5% of tax due
- Six months late – 5% of outstanding tax due at that date
- 12 months late – 5% of outstanding tax due at that date
To avoid these penalties, you should enlist the help of a dedicated local accountant that can work periodically on your behalf to maintain your tax return commitments – and provide a schedule for tax payments.
Inaccurate records for expenses and invoices
There is no need to pay for extra hours for your accountant to untangle your confusing record of expenses and invoices. Find a local accountant who can offer you a dedicated solution to accurately record expenses.
Platforms like Dext ensure you never lose another expenses receipt, as you can quickly photograph or scan your receipt at source and send it instantly to your accountant.
Overpaying of tax
The inaccurate categorisation or classification of regular transactions such as monthly subscriptions or payments happens more often than you think. Small business owners who handle their own books may classify these regular transactions in a certain column one month and include it in another column the following month, making it difficult to keep track of outgoings.
Equally, it is also possible small businesses miss out on claiming the maximum allowable amount for tax because of this. They may even be forced to pay for their accountants to spend more time recalibrating periodic transactions under one heading.
Using unsuitable bookkeeping solutions
Many small business owners will choose a bookkeeping software without identifying whether it is the right fit for the way they do business. If a business does not issue invoices, an accounting solution with an invoicing function is not necessary, for example.
During initial consultations with a professional accountant, they will often specify an accounting solution that would work best for your business. You should not have to fit around your bookkeeping software – your software should fit around you!
Now is the ideal time for your small business to digitise its accounting regime. If you are a landlord or an unincorporated business such as a sole trader with turnover above £10,000 per year, you will be required to onboard for Making Tax Digital (MTD) for Income Tax from April 2024.
Making Tax Digital is designed to revolutionise the UK tax reporting system, making it more efficient and effective..
At TaxAssist Accounts, we can can work with you to comply in advance of April 2024, including the selection of appropriate accounting software that is compliant and futureproof for your business.
Manual entry record keeping which eats in to your family time
For some small business owners, manual accounting and administration has been the status quo for many years, if not decades. But many are unaware of the time that can be saved by harnessing the speed and automation of state-of-the-art accounting and expense software and apps.
Some entrepreneurs spend time pulling their bank statements and uploading them, but these next-generation solutions can pull your bank data directly into accounts to save you valuable time and energy.
Quite often business owners will use their family time, i.e. evenings and weekends, to work on the record keeping for their business which probably isn’t the reason someone chooses to work for themselves. Alternatively, this work can eat into the valuable time that could be spent improving or developing the business and driving up income.
Timely, accurate accounting and bookkeeping really does add significant value to businesses of all shapes and sizes. It is a false economy not to lean on a professional so that you can focus on growing your business. There is no longer any need to fall victim to any of the above small business accounting errors.
TaxAssist Accountants can help you with the right advice to support your business. For friendly advice and support, why not arrange a free initial consultation about your firm’s accounting needs with us today? You can pick up the phone and call us on 0800 0523 555 or fill out our online enquiry form to get the ball rolling.
Date published 8 Jun 2022 | Last updated 8 Jun 2022This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.