Running a business is difficult without the added burden of filing taxes each year. Tax season is one of, if not the, most dread season for small business owners. Unfortunately, there is no method to avoid paying taxes; nevertheless, there are ways to legitimately reduce their tax burden.
Here are some small business tax suggestions to keep your records in order. Also visit this website on upgrades to make to your business during the summer break.
Separate your personal and business finances.
As a business owner, your income and other cash will be combined with your earnings rather than being dumped into a personal account.
No one wants to have to sit down and look through all of their shopping lists or personal transactions to find that one piece of business. To keep things as easy as possible, open a fresh bank account for all of your business needs.
You’ll be better organised this way. Your money remains private, while your business finances stay in your business account. There will be no more wasted time sifting through numerous transactions. Easy.
The most vital element in minimising your taxes on business is to deduct every dollar spent on business expenditures. That entails being well-organized. Tax returns should never be prepared with a box of receipts. You’ll never know if you didn’t keep a receipt and thus missed the deduction.
Here are some pointers to help you stay organised:
- Track your bank account activity with bookkeeping software; by relating your costs to your banking activity, you’ll be sure to catch all expenses.
- Prepare your tax return using the financial statements supplied by your accounting software.
- Receipts should be saved either in a file or by attaching electronic copies to transactions in your bookkeeping system.
Pay your estimated tax payments.
Estimated tax payments on business income are required of small business owners. You Owners must estimate the income tax due on their business income and pay it in four quarterly instalments. Sole entrepreneurs and partners must calculate self-employment and income tax on their business earnings.
Estimated tax payments are generally required only when you have income that is not subject to withholding, such as company income. But the amount of the estimated costs are based on how much tax you think you will owe on your tax return and how much you think you will be withheld.
Remember and follow tax deadlines.
Speaking of those tricky tax deadlines, do whatever it takes to remind you that the deadline is near. Reminders on your phone, a countdown – whatever. A nearing tax deadline might be stressful, especially if you’re hurrying because you forgot, and any mistakes you make will take longer to process.
It’s a very simple step. Make a note of the tax deadline, set a reminder ahead of time so you have enough time to complete your tax forms correctly, and the rest is easy. HMRC will not be investigating you, your records will be correct, and you may forget about it until the next deadline.
Maintain All of Your Receipts.
We’re not saying save and file every receipt after every transaction, but save any business-related purchase receipts so you can claim company expenses. It all depends on your business type; for example, if you work from home, you can claim back some of your domestic expenses.
It could range from stamps to stationery. Keep track of any business-related purchases or expenses and file them in the specified neat and orderly records.