It’s that time of year again - nope, not Christmas - we’re edging closer to the tax return deadline on 31st January! I know that tax can be a tricky, overwhelming thing to deal with, so today I’m sharing five super simple actions you can take to make filing your tax return simple and stress-free.
Prefer to listen? Here’s the accompanying podcast episode. Don’t forget to subscribe on iTunes!
File your tax return as soon as possible.
It goes without saying that it isn’t a good idea to leave your tax return until the last minute although lots of people do, which often leads to the HMRC website going down - not something you want to risk!
You can submit your Self Assessment tax return from April, and I recommend submitting it as soon as you can. This not only means that you won’t have to worry about missing the deadline, but also that you have plenty of time to find any missing receipts or information and that you’ll know what your tax bill is and have plenty of time to pay it before the payment deadline (which is also 31st January).
Update your bookkeeping regularly
It’s really easy to put off updating your bookkeeping. After all, it isn’t the most fun part of running a business. Even I find it boring and I’m an accountant!
But it’s an essential part of being self-employed, and it will save you lots of time and energy to update your books on a regular basis than to find yourself having to do a year’s worth of bookkeeping in one sitting because you kept putting it off throughout the year and now you need it for your tax return.
Decide whether you want to update your bookkeeping once a week or once a month, and set a reminder in your phone to do it at that time. This way, you don’t even have to think about when to update your books, you’ll get the reminder, update and then you can forget about it again until next time.
Keep your money in separate bank accounts
Although sole traders aren’t required by law to keep their business and personal banking separate, it will help massively when it comes to updating your bookkeeping and seeing how well your business is doing.
In fact, it’s a good idea to have four separate bank accounts:
personal account - for your everyday spending
savings account - for your savings
business account - for being paid and buying things for your business
tax account - to put 25-30% of each payment you receive through your business into
Having a separate bank account for tax means that you won’t spend your tax bill and have to scrape money you don’t have together to try and pay your tax bill before the deadline. Put the money aside as soon as you receive it to avoid the temptation to spend it and pay it back later.
Remember that HMRC aren’t out to get you
HMRC can seem scary because they’re part of the Government and hey, we all know a story about someone who messed up their tax and had to pay a huge penalty. But the thing is, HMRC are not out to trip you up or give you a hefty fine. They just want you to pay the right amount of tax, and if you do that you’ll both get along just fine.
If you’re having an issue with your tax return, you’ve made a mistake on it or you’re struggling to pay your tax bill, give HMRC a call as soon as possible. Their advisors are usually very understanding and helpful, and they’ll do what they can to resolve any problems you have without too much drama.
Just do it
Filing your tax return can feel overwhelming, confusing and complicated, especially if it’s your first one. The online form seems crazy long and it uses a lot of language you might not understand. But it’s actually pretty simple!
The bulk of your Self Assessment tax return is answering questions to confirm your information and to tailor your tax return so you aren’t filling in sections that aren’t relevant to you. The most important part for most business owners is making sure that you give the right figures for your turnover and expenses. HMRC will calculate your profit and tax bill based on this.
I’ve created a step by step guide to filing your tax return which includes a walkthrough of the Self Assessment tax return, so you can see exactly what it looks like and how to complete each section. You can check it out here.
And that’s it! Five simple actions that you can easily put in place to make filing your tax return stress-free.
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