In the euphoria of starting your own business, it’s will hardly a surprise to hear that 'tax' isn't exactly a buzzword on the tip of your tongue.
Chances are, up until now, it's been a side note on your payslip - regularly prepared by your previous company's trusty payroll department.
Well, now the onus is on you. Sure, you might rightfully consider where and how you will attract those elusive first customers, but it's crucial not to drop the ball with paperwork as well.
Bearing this in mind, let's now mull over four simple mistakes that start-ups tend to make regarding the dreaded T-word.
Mistake #1 - Not registering for tax
This might seem like an obvious one, but it's astonishing how many start-ups don't bother registering for tax until it's too late. The HMRC are pretty understanding of start-ups, but you need to make sure you get registered as soon as possible to avoid any penalties.
But, what does 'as soon as possible' actually mean? Well, HMRC allows you to register within three months of starting your business. This isn't quite as plain as it might sound, though, as only 'active' businesses need to register. What does 'active' mean? We'll leave you with this thorough guide to find out the exact definition.
Mistake #2 - Not keeping track of expenses
This is another big one for start-ups. It's all too easy to forget to keep track of business expenses when you're preoccupied with more pressing matters. However, it's crucial to keep on top of this as you can claim back a lot of these costs at the end of the financial year - making your tax bill a lot more manageable.
What counts as a business expense? Broadly speaking, it’s anything necessary for you to run your business can be claimed back. This includes everything from stationery and postage to travel costs and even the various forms of insurance you may have. It's always a good idea to keep a detailed record of all your expenses, as this will make compiling your tax return a lot easier.
Mistake #3 - Not organising your finances
This one is particularly relevant for start-ups operating as limited companies. It's essential to keep your finances in good order to avoid any nasty surprises down the line. This means organising your accounts and making sure you have a good system for tracking your income and expenditure.
It's also a good idea to set up a separate bank account for your business and keep a close eye on your cash flow. This will help you stay on top of your finances and avoid any nasty financial crises.
Mistake #4 - Not seeking professional advice
This is perhaps the most costly mistake that start-ups can make regarding tax. It's always a good idea to seek professional advice from an accountant or tax specialist, as they will be able to help you with all aspects of your tax return.
They will also be able to offer invaluable advice when it comes to setting up your business finances and organising your accounts. This can be a huge help, especially in the early stages of your business, when things can be a bit hectic.
Published by John Liverstone