When it comes to filing taxes in the UK, the muddled details often confuse small businesses. Well, the financial language comes across as alien to many small businesses in the UK. What’s more, is that the navigation of filing requirements can be more time-consuming for a startup business.
That said, the cloud of unfamiliarity can evaporate once you seek the necessary guidance from a tax expert or professional accountant. In fact, most of your filing is about pre-planning. Here are some of the essential tips UK small businesses should bear in mind before and after filing taxes:
Filing for the First Time?
Amidst the chaotic COVID-19 period, more small businesses in the UK will be filing taxes online than ever. Although paper form filing still exists, filing taxes online may become a new norm for all businesses in the foreseeable future.
First-time filers, of course, will have to register with HMRC as soon as possible. Apart from filing taxes via their website or phone call, you can fill out the traditional filing form. In any case, your National Insurance number, business details, and personal information are core requirements for registration.
Due Date: When Your Small Businesses Should File Taxes?
As of now, the HMRC has extended the due date for filing taxes. The current deadline to file taxes is July 15. However, if you cannot meet the current deadline because of the Coronavirus uncertainty, you can avail a 3-month extension.
The following chart represents the tax brackets for the year 2020:
|Tax Rate||Income||Tax Rate|
|Basic rate||£12,501 – £50,000||20 percent|
|Higher rate||£50,001 – £150,000||40 percent|
|Added rate||Above £150,000||45 percent|
Calculation: How does it Work?
Once you file your tax return online, the HRMC will inform you about the total amount of taxes you owe. Ideally, you should apply for HMRC’s tax rates as per your annual earned profit.
Filing Taxes: Go Digital
If your small business has a turnover of more than £85,000, you will need to submit VAT returns to the HMRC. You can, for instance, send it via a tax accounting software. Currently, almost 90% of small businesses in the UK expect a change in the approach they file or process tax returns.
And if the digitalization of filing taxes becomes a new standard in the coming years, make sure you comply with all the HMRC requirements. And as more compliance changes are on the horizon, you will need to adapt to the new business environment.
Small businesses operating in the UK should have the broadmindedness to figure out how to fill the filing gaps. And these requirements are especially more relevant in these dire times. For instance, allocate your budget wisely and avail services of freelancers only where you see the value.
You can, of course, dive into online freelancing platforms to take care of your business’ marketing, administration, and design tasks. Though most importantly, do not forget to have a competent and experienced tax expert by your side to get the up-to-date advice on various tax matters.
We can help with all of your business and personal tax and financial planning needs. For a strategic review of your finances, please contact us.
Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our consultants if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.