The new tax year just began on Monday 6 April. Many people and businesses often find themselves in a panic as the tax year comes to an end, trying to find their records and remember whether they’ve kept all their receipts. To save you from that experience in 2016, here are five tips to help you get this new tax year off to the best start.
1. Start the year as you mean to go on by using your past experience of how your business runs over a year to design a bookkeeping and administration plan. Then, diarise time on a weekly or monthly basis, over the coming twelve months to keep track of your finances and ensure that you keep on top of your business affairs.
2. If, after planning your workload, you are struggling to find enough time in the day to earn a living because you are drowning in administration, think about delegating non-core activities by hiring a bookkeeper or administrator. While at first it might seem to be an unnecessary expense, think of it this way; by paying a few pounds a week or month to a person who specialises in providing bookkeeping services, you can free up some of your valuable time to concentrate on more of what you are good at in the business, and as a result can focus on generating income which makes up for the cost of paying for the bookkeeper or administrator. Recent AAT research has shown that many small and medium businesses lose money because they don’t have anyone with a financial qualification doing their accounts. Don’t let your business be one of them.
>See also: The Annual Investment Allowance explained
3. In addition to working on your time-management, you should ensure that you obtain hard copies or download and save e-copies of all receipts in respect of all of your business-related expenditure. Not only will it mean that you do not overlook claiming legitimate tax-deductible business expenses, adopting this course of action will make your accountant happy and it will also make your records robust if they are subjected to an HMRC compliance check. All of which has to be a winner.
4. If you do hire an accountant, be pro-active by finding out from them whether there are any changes arising from the recent Budget that you should take into account. For example, tax-incentives for investing in fixed assets. The more that you know early on, the easier it is to build any necessary changes into your business plan.
5. You can derive a huge benefit from investing in some low-cost entry level Sage software with a per-monthly cost of around £15. The benefit to you of formalising your record keeping using a computer-based bookkeeping package is that at a press of a button you can retrieve timely management information. You will find this so much more advantageous than collecting your records in lever arch files and passing it to your accountant at the end of a quarter and, in turn, receiving little back except advice on how much VAT to pay and a set of year end accounts and a tax return.
Furthermore, as time goes by, layers and layers of useful data will build up enabling you to compare current outcomes with similar periods in the past. Not only that but many of the available bookkeeping and accountancy packages also link straight to nominated bank accounts to enable easy reconciliations to be undertaken and, also to HMRC systems, thus enabling you and your company to file VAT and payroll returns online.
6. There is a mantra that is linked to the running of a successful business, which is:
“In order to succeed in running your business you need to work “on” it and not “in” it.”
What does that mean? In essence a good operator of a business ‘works smart’; looks foward and plans for the future, seeks to control and attempts to shape forthcoming events (work “on” their business) rather than an operator who is the polar opposite and as a result can only react to whatever comes their way (works “in”). The latter is rather like a ship constantly in the teeth of a gale as they and their business lurch crisis to crisis.
Ask yourself, ”which would I rather be like?” and the answer will inevitably be ”the first example”. In which case, you could do a lot worse than starting this new tax year by following the above tips.
Brian Palmer is Tax Policy Adviser at AAT, (Association of Accounting Technicians), the UK’s leading qualification and professional body for vocational accountants