It’s January, we’re back to work and it’s that dreaded time for so many business owners…
Tax return time!
Because here in the UK, the self-assessment deadline to complete and submit your tax return is January 31st, for the tax year that ended way back on April 5th last year.
Inevitably, so many people leave it until the last minute. They enjoy their time off over Christmas, spend time with their family, eat too much and drink too much and then get back into the office and suddenly it becomes urgent to get all this paperwork done (that’s really been hanging over their head during all the festivities anyway).
And of course, they’ve then got to find the money to pay their tax bill!
Which means that instead of starting the New Year feeling inspired and motivated for all their big goals and dreams for the year ahead – they’re stressing out about finishing their tax return, panicking about paying the bill and going back into their business wishing that actually, they could just walk away from it all.
If any of this sounds familiar – if you’re reading this blog because you’re procrastinating on working on your accounts (which I completely understand, by the way!) – quite honestly, it starts with a decision and making the commitment to yourself that you’re NOT putting yourself through this again and next year WILL be different.
So what can you do, practically speaking, to make the whole tax return thing so much easier?
Well, the first thing is to think about getting an accountant to help you. If cashflow has been tight, I totally get that you might feel like you can’t (or don’t want to) invest in people to help with the stuff that you can do yourself.
When I started in business, I used to do my own tax return too. Admittedly I never used to leave it ‘til January, because I’m one of those people that likes to get things done early! But I used to work on the principal that my business was pretty straightforward and it would be quite a simple form to fill out online myself. After all, I fill in forms online every day as part of my work with my clients.
But – and this is where an accountant becomes invaluable! – a couple of years later, I wanted to get a mortgage and they required an accountant’s reference. I needed someone to be able to talk about the validity of my business; the projection of what my income would grow to and how sustainable my business was.
So I took on an accountant. And although I had to pay him a fee, actually by the end of the year, he had pointed out all these things that I could claim on my tax return as expenses, which I didn’t know about back then. He saved me WAY more that year than the £500 I paid him.
This is often the way with a good accountant and as your business grows, they’ll do so much more than just submitting your tax return. They’ll be able to talk to you about profit trends in your business, almost like a Financial Controller, in terms of what your expenses look like and where your business could be heading.
They can also talk to you about exit strategies and tax-efficient ways of coming out of your business, so you can plan for this far enough in advance to actually make it happen. Because ultimately, you will want to retire at some point or at least work less hard or see fewer clients, with the money there to do whatever it is you want to do.
And in the meantime, wouldn’t it be great if you didn’t have to worry about your tax paperwork?!
Whether or not an accountant is in your plans, let me give you a couple of very practical pointers.
Firstly, your tax return can be completed any time from April 6th. I think lots of people think that if you file it earlier, you have to pay your tax bill earlier, but it’s simply NOT true. You don’t have to pay anything until January, no matter when you submit your return online.
So why bother to file it in April or May, when you’ve got ages until the deadline on January 31st?
Well – for so many reasons! It feels SO GOOD to know it’s done and out of the way, especially if you’ve broken your promise to yourself in the past, that you won’t leave it until the last minute again. It’s so easy to underestimate the power of feeling like you’re on top of all the financial stuff and completely in control!
Depending on how you keep your financial records in your business, sorting your tax return in April when it’s all fresh in your mind – rather than 9 months later in January, when it all feels like a distant memory – can make things quicker, easier and less stressful all round.
And filing your tax return earlier means that if you need evidence of your income for anything later that year – like loan applications, grant applications or an amazing unforeseen opportunity that comes your way – you have it all to hand and you can hit the ground running, with no delays.
Of course, there are some people who like to pay their tax monthly on account, so they’ve got it out of the way, but most people pay their tax bill in January and then again in July.
The biggest thing for most business owners is that the earlier you file your tax return, the sooner you know how big the bill in January will be, so you can start putting money aside for it.
Imagine submitting your tax return in the last week of January and your accountant calling you to say that you owe thousands of pounds in taxes (maybe you don’t have to imagine, if you’ve been there before!). If you don’t have that money – if you don’t know where that cash is going to come from – it’s beyond stressful. It’s not even like you can put it on a credit card anymore.
Money trouble in your business has a habit of seeping into every area of your life, from how well you sleep at night to your relationships and physical health. And I don’t know about you but to me, the cost of burying your head in the sand or procrastinating on filing your tax return is simply never, EVER worth it.
Especially because it doesn’t need to happen!
If you’ve followed my blogs before when we’ve spoken about Profit First, you’ll know I’m a great advocate for putting money away each month so that you have got money to pay both your Corporation Tax bill and your personal tax bill.
But even if you’re not organising your money into different pots or using any sort of system like Profit First, it makes sense to put your tax money away because this money is not yours. It never was yours.
If you think back to being an employee (even if it was years ago when you were a student!), your employer automatically deducts tax and National Insurance from your wages and you get what’s left. You don’t have to put money away for your tax, because effectively your employer does it for you.
As a business owner, they trust you to pay your own tax rather than deducting it at source, but it does mean that a bit of self-discipline is required, to make sure you are doing what you need to do.
If you want to find out more about how to get properly organised with your money, then my ROCK Solid™ programme is a brilliant place to start. It’s specifically designed to guide you step-by-step through getting all of your financial foundations rock solid (hence the name!) and is completely self-study over six weeks, where the content is released to you gently each week without any sort of overwhelm.
We look at completely organising your finances – creating a regular income for you from your business; emergency savings and creating your financial comfort blanket; making sure you’ve got the right sort of insurance; writing your Will; tidying up all those loose ends and money stuff that people never get around to, but KNOW they should…
As well as getting clear on your focus and having real goals around money, wealth, savings and investments, so you can work towards them…
And of course, putting away money for tax!
ROCK Solid™ is an amazing programme, we’ve had some great responses to it and it’s available for you to start when YOU are ready. No big launch, no false scarcity tactics…it’s right here, sitting on our website.
So do take a look and see if this could be the perfect way forward for you, too!
Until next time,
Claire
p.s If self-study isn’t your thing and you want deeper support, then just click here to message me personally and we can chat about options to work together 1:1…and you need NEVER worry again about having the money to pay your tax bill!