Most Common Mistakes Businesses Make With Their Taxes
Taxes may be something that many people want to bury their head in the sand over, but they are a crucial aspect of running a business of any size. Because taxation can be a minefield for many entrepreneurs to navigate, it’s vital to understand your responsibilities and not to fall into the trap of making some common mistakes. Using an external accountant can be an effective way to ensure your business’s tax liabilities are met on time and in full, as experienced accountants will take care of all aspects of your tax management, such as completing and submitting tax returns.
In this article, we’ll discuss five common tax mistakes that businesses make and some tips to avoid them.
One of the most problematic mistakes in taxation is missing deadlines. Small business owners often have multiple tax obligations, including monthly (PAYE), quarterly (VAT), and annual filings (accounts, corporation tax, or self-assessment tax returns). Failing to file your taxes on time can result in hefty penalties from HMRC so, to avoid costly mistakes, it is well-worth setting up reminders or enlisting the help of a tax professional to ensure compliance.
Assuming You Understand Tax Rules
Taxation rules are complex and liable to change. Assuming that they are easy-to-understand without seeking expert guidance is a common mistake that small business owners make. Tax laws can be intricate so attempting to navigate them without professional advice can lead to missed opportunities for deductions and exemptions or incorrect figures being submitted. Outsourcing your tax affairs to a specialist, however, will enable you to stay informed about the latest tax regulations and how they affect your business, as well as instilling confidence that your accounts are properly managed.
Procrastination is another common mistake that can cost your business. Waiting until the last minute to prepare and file your taxes can result in rushed submissions that are riddled with errors. It’s essential, therefore, to maintain organised financial records throughout the year and to begin the tax preparation process well in advance of deadlines. Not only with a proactive approach reduce your stress levels, but it will also help you to identify potential tax-saving opportunities.
Misclassifying Workers As Self-Employed
Some businesses mistakenly classify workers as self-employed to save money on employment taxes and benefits. However, misclassifying employees can lead to legal issues and penalties, as some well-known companies have recently discovered to their cost. It is crucial, therefore, to understand the distinction between employees and independent contractors according to tax regulations and employment laws. Consult with a tax specialist to ensure that your employees are correctly classified to avoid complications later.
Mixing Personal And Business Expenses
Mixing personal and business expenses is a recipe for tax problems and can lead to considerable complications when you attempt to calculate deductions and report your business’s income. To avoid, maintain separate bank accounts and credit cards for your business and personal finances, as a clear separation will simplify record-keeping and ensure you don't inadvertently claim personal expenses as business deductions.
Contact The Tax Experts At Vanilla Accounting Today
If you need professional advice about how to manage your business’s taxes or would like to optimise your tax breaks to minimise your liabilities, please get in touch with the tax specialists at Vanilla Accounting today!
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