If only the entire exercise of operating a business was not enough, there is also the additional complexity posed by annual tax filings for business owners. The process is as it is, hard enough, and you need not make it even harder by paying attention to the procedure only once a year. Instead, it would be far wiser on your part to collaborate with your business accountant throughout the year and work together to lessen the load of the task. Additionally, you also need to ensure that you avoid taking any financial business decision without consulting your financial adviser or business accountant. Otherwise, you may have to spend more money in the long run. The following handy tips should make the whole process of filing your business taxes easier:

– Make Sure Your Income Reports Matches Those Of The HMRC

Chances are copies of all invoices received by a business are there with the HMRC also. As the experts from keepertax.com point out, this lets them match the income you report to the tax authority and the amount they know that you have received. Experts recommend that you make double sure that these two figures match each other. Otherwise, it will certainly be a red flag for the HMRC and will draw the tax authorities’ attention. Keep in mind that you need to report income even if they come from clients who did not provide you with an invoice. Remember this best practice with regards to other taxes as well, advise experts.

– Make Sure That Your Accountant Is Suitable For The Task

It is erroneous to think that an accountant’s role is limited to only preparing financial statements and filing your business taxes. Experts will advise you not to hire accountants who provide these services only and make sure the accountant is suitable for your business. Remember our earlier advice about consistent teamwork? Well, your accountant plays a crucial role in ensuring a smooth and factual tax filing. As such, you both need to co-operate and work together throughout the financial year. Your accountant needs to spend time with you tracking income and expenses, keeping a tab on your net and gross profit, and make sure that the cash flow is healthy. You need to understand how crucial accounting is for your business to survive and grow.

– Maintain Detailed Records

Maintaining detailed and accurate income and spending records all through the year will help a lot for tax returns that are accurate and valid. If you fail at this, it might not only leave deductions, but you might also be inviting yourself to the risk of an audit. Most experts recommend that all businesses, no matter how small, invest in at least a basic version of effective and suitable accounting software. Such software is beneficial for their user-friendliness, affordability. They will let you track all income and expenses of your business.

– Make Sure To Keep Personal And Business Expenses Separate

In the undesirable situation that your business undergoes an HMRC compliance check, it might prove to be a costly mistake to mix personal and business expenses. It is a mistake that you should avoid at all costs. It is quite likely that the HMRC tax compliance check will examine your accounts, too, even if you have reported your business income and expenditure correctly. To avoid this, ensure that you have a separate business bank account and credit card, which you use only for business purposes.

– Know That Net And Gross Incomes Vary

It is a common mistake among business owners, especially the smaller ones, to be aware of the significant difference between net and gross income. It is essential. It involves the fundamental logic that if you sell a product at a lesser cost than its manufacturing costs, you will incur losses. It is true, no matter how many units of the product you manage to sell. To make things clear, we can take the example of a product costing you £100. You might sell it for £120, in which case your gross income will be £20. But if you calculate marketing and other costs, the net income can be £10. For more profits and to facilitate business growth, you need to know both your gross and net profits and the difference between them.

– Utilize Capitalization Rules To Your Advantage

Businesses that buy tangible forms of property or relevant business equipment stand to benefit from a significant deduction on their taxes. Tax professionals refer to this practice as capitalization, and you need to ensure your accountant properly understands the same.

There’s a lot about taxes that you need to know to stay on the right side of the law and perform your duties as a law-abiding business. Such awareness will do small business owners, especially new ones, a world of good. The tips mentioned in this article will empower you with the knowledge that will help you do the right things and save yourself from many headaches later on. Stay aware and be responsible!