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It can be daunting to navigate the system of business taxes in the UK, especially as rules become strict and the risks of penalties increase. The most recent HMRC figures revealed that small businesses are now responsible for 60% of the UK’s total tax gap, leading to £28 billion in losses for the 2023-24 tax year. Even more concerning is the fact that last year, more than half (53%) of all small businesses had mistakes in their tax returns, with more than 46% of the tax gap attributable to genuine errors or a failure to take reasonable care.
This blog reveals the frequently encountered tax problems of UK-based small business owners that they are facing nowadays and provides real-life methods that protect their hard-earned profits. If you, as a business owner, are also finding it challenging to deal with the issues of allowable expenses, classifying workers, or income reporting, this guide is the perfect solution.
Top Small Business Tax Mistakes and How to Avoid Them
1. Failure to Take Reasonable Care
Today, about 30% of small businesses are heading towards losses. The reasons could be not double-checking the figures, not being aware of the tax rules, or not taking professional advice. The question is how to avoid such expensive mistakes. You must review your filings carefully, stay aware of the changes in HMRC, and if you have any doubt, do not forget to take advice from a certified accountant. Remember, being constantly watchful is the only link that keeps the business on the safe side and completely free from unwarranted fines.
2. Overlooking Available Tax Reliefs and Allowances
Small businesses have the liberty to benefit from excellent tax reliefs such as the Annual Investment Allowance (AIA) and Research and Development (R&D) tax credits, which are a means of decreasing the taxable income and increasing the cash flow of the business. Be very consistent in your business dealings to take full advantage of these opportunities, and also be sure that you are claiming all the expenses that are allowed.
3. Misclassifying Employees and Contractors
Misclassifying a worker as a contractor when they are an employee can lead to compliance-related problems, tax penalties, and legal issues. Consequently, knowing the exact status of each worker’s employment is indispensable in order to be in line with HMRC requirements. To clarify this matter, you can get in touch with top UK CA firms such as the ASK Group. There you can meet accountants who are ACCA and CIMA qualified and have more than 10 years of experience.
4. Missing Tax Deadlines
If tax deadlines are missed, it may lead to a significant monetary penalty, interest charges, and compliance issues, especially if the business is small. You have two options to correct these mistakes. First, set clear reminders and maintain accurate financial records. In case you are short of time, you may as well link with skillful CA firms that can enlighten you about various tax services and help you in the right way.
5. Mixing Personal and Business Finances
It is also essential to keep personal and business finances in order to avoid confusion, misreporting, and errors in tax filings. It provides more straightforward financial tracking and less stressful tax preparation. The most recommended way is to have a separate bank account for your business, which will facilitate expense management, keep the business transparent, and abide by the rules.
6. Ignoring VAT Obligations
A business is required to register for VAT when its taxable turnover exceeds the official VAT threshold. To fulfil your compliance obligations, you must keep accurate and detailed records of every VAT invoice, return, and transaction of the business, which will help to facilitate an audit, mitigate the risk of penalties, and allow your business to be financially organised.
How ASK Group Helps to Avoid Small Business Tax Mistakes
As a small business owner, you may face challenges managing your taxes. Join a reputable UK-based CA firm like ASK Group. The following are the benefits of entering the firm:
1. 15+ Qualified Accountants
Here you’ll find 15+ ACCA and CIMA-qualified accountants. Their deep expertise and knowledge can help you understand tax law and meet compliance requirements.
2. Comprehensive Accounting Services
ASK Group offers accounting services that are comprehensive, such as bookkeeping and financial reporting of a detailed nature. They keep a very close eye on the recording of transactions for compliance and transparency purposes.
3. Specialised VAT Services
ASK Group acts as the business partner of your company to ensure that your business remains totally compliant with all the steps concerning VAT registration, filing, and reclaim. Their specialists make sure that all your returns are as per HMRC rules and are done on time. This kind of preventive step gives a very small probability of errors and thus helps in keeping your business free from the imposition of fines.
4. Reliable Payroll Management
Without a doubt, precise and prompt payroll services serve as the basic means for accurate computation of all employee taxes, deductions, and contributions. This process is very instrumental in meeting HMRC requirements and completely getting rid of mistakes that can be very costly. By implementing a good payroll system, your business will be free from fines and ensure that your workers get their salaries on time.
5. Personalised Support
To give you the best possible financial support and expert advice, a devoted accountant is allocated to your business. They really get to know the goals and challenges of your company. With the help of these continuous guidelines, it becomes easy and efficient to manage tax planning, compliance, and other financial decisions throughout the year.
Bottom Line
Not making tax mistakes in small businesses means that a person has to be informed of the HMRC rules, seek the advice of experts, and do other things. Since small business owners take care of their businesses by sticking to these rules, they are able to avoid expensive mistakes and have the opportunity to claim different tax reliefs. Working with a professional CA firm such as ASK Group will make all these things very simple for you. The firm keeps you updated with the HMRC rules and offers other personalized tax services to make taxation less complicated for you.
Ready to simplify your tax management? Contact ASK Group today to get expert help and ensure your business stays 100% compliant.
