Planning for your self-assessment tax return
Many taxi drivers across the UK are self-employed, which means that they will be completing their self-assessment tax returns due at the end of January. Failure to comply can lead to heavy fines and prosecution, so it is essential to keep on top of the paperwork and make sure everything is in order. However, unlike larger firms, many self-employed drivers will not opt for the assistance of an accountant due to the costs involved. Consequently, it is not uncommon to be disorganised when HMRC self-assessment is due, nor surprised when unexpected tax is payable. It is therefore recommended to plan ahead to be sure you are not caught short.
Keeping on top of paperwork
Keeping a record of income and expenditure is not only important for ensuring you are organised when tax is due, it’s a legal requirement. HMRC can demand to see up to 6 years of accounts at very short notice. Some sole traders will keep their receipts in an unorganised folder, others won’t even do that. To keep everything in order it is recommended you set up a separate business bank account, ensuring that your personal and business finances are kept separate. It will certainly help when it comes to working out your tax return, but it is still only one small step to becoming organised. Keeping a simple spreadsheet recording your income and expenditure is a further step that will add some order to your pile of receipts. By listing each transaction chronologically, and at regular intervals such as monthly or quarterly, you’ll be in a much better position to add everything up when your self-assessment return is due.
Putting money aside for tax
One of the more serious side effects of failing to maintain orderly accounts is the unexpected tax bill. Many small businesses go through the year without setting aside enough money to pay taxes, only to discover they owe money they don’t have when it’s too late. By keeping your paperwork in order throughout the year, you can also estimate your ongoing tax liability and set aside enough each month to ensure that you are covered when payment is due. Most business bank accounts offer separate online accounts for business savings. By making use of these accounts you can keep your money set aside for tax separate from your day-to-day business account.
Getting professional help
Whilst bookkeepers and accountants may seem expensive, the money they could save you usually makes paying for their services worthwhile. At the very least, having an accountant will take away the pressure and liability of completing your accounts, giving you less to worry about and more time to service your customers. They can also keep you informed about how your business is doing, allowing you to make better decisions in good time. With numerous schemes and options to offset your taxes, and a small business accountant charging as little as £50 per month to keep your basic accounts in order, it may be a good option to save you time and hassle in the long-term.