5 ways to make a fresh start for your business in the new tax year

From keeping on top of expenses to registering for VAT, make sure you stay on the right side of HMRC in 2016…

The new tax year has just begun in the UK, which means now is a great time to make some changes to your business and give it a boost over the next 12 months.

Here, Emily Coltman FCA, chief accountant at cloud accounting software provider FreeAgent, offers five top tips to consider implementing to give your business a fresh start in the new tax year.

1. Stay on top of your expenses

One of the most common areas that micro-business owners make mistakes on in their accounts is their expenses. Whether it’s trying to include expenses that aren’t allowed, missing out ones that are, or just not bothering to claim anything that they think is too small, fiddly or time-consuming, it’s an area fraught with pitfalls.

We conducted some research with YouGov last year which found that just 22% of micro-business owners say they claim all of their expenses. Around one in five also said they wouldn’t claim an expense if it cost £10 or less, as these expenses were too small and insignificant to bother with. We also found that (according to our own data) the average micro-business owner has £216 worth of these smaller value expenses per year, which potentially equates to hundreds of millions of pounds worth of tax relief going unclaimed across the whole of the UK.

With all this mind, it’s a great idea to take this new tax year as an opportunity to brush up on your expense management processes. Make sure you have an easy, user-friendly system in place for logging and explaining business expenses, as well as making sure you record your expenses as soon as you spend the money. If you let those receipts stack up, you’ll face a tougher task managing them when your tax return is due. Don’t dismiss the smaller expenses either – they can quickly add up and if you don’t claim for them, you could miss out on more tax relief than you might think!

2. Make sure your invoice template meets HMRC’s requirements

When you invoice your clients, you must legally include a list of basic information on your invoices, including:

  • Full details about your business
  • The price you’re charging
  • The date(s) of the work you carried out
  • A clear description of what you’re charging for

Make sure you know all the requirements for the invoice you’re sending – for VAT invoices, the list of required information is even longer – and that you’re not leaving anything out. Good, clear invoices won’t just help you stay on the right side of the law; they will help provide greater clarity to your customers, reduce the chance of any confusion and they could even (hopefully) help you get paid more quickly.

3. Check if you’re eligible for the Employment Allowance

First introduced in 2014, the Employment Allowance is a reduction in employer’s National Insurance. It was originally set at £2,000 for most employers, but since 6 April 2016 the allowance has increased to £3,000 and limited companies who only have one director and no other employees are no longer eligible.

This means that even if your company was eligible for the Employment Allowance in previous years, it may now no longer be. If you’re unsure, check out the guidance from gov.uk on excluded companies, get up to speed with all of the current rules and find out whether your business will qualify (or continue to qualify) for the Employment Allowance.

4. Find out whether you have to register for VAT

On 1 April 2016, the threshold for when you have to register for VAT changed from £82,000 to £83,000, and the de-registration threshold changed from £80,000 to £81,000.

This means that you won’t be required to register your business for VAT until it makes VATable sales of £83,000 or more during any rolling 12-month period. If you are currently registered for VAT, you will be able to de-register when your business makes sales of £81,000 or less during any12-month period (and you’re confident that this will continue to be the case in the following 12-month period).

If your VATable sales are approaching the new threshold, you’ll need to start thinking about registering your business soon. If you’re unsure about how to do this, you should ask your accountant for help.

5. Make sure you’d be ready for a call from HMRC

When you’re running a business, it’s important to keep a tidy, up-to-date set of books. This doesn’t just make it easier for you to stay on top of your finances; it also keeps HMRC happy and makes things easier if you’re ever flagged for inspection.

Make sure you stay on top of your day-to-day bookkeeping, avoid making basic mistakes in your accounts and always file your tax returns on time in order to stay on the right side of HMRC. Check out our guide on keeping your books tidy to ensure that your business is ready for a visit.

Emily Coltman FCA is chief accountant at FreeAgent, who provide multi-award winning cloud accounting software for freelancers, contractors, micro-businesses and their accountants. Try it for free at www.freeagent.com.

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