Tax mistakes can be extremely costly, especially for small businesses. From forgetting employee benefits to submitting the tax return late, here a group of accountants in London take a look at some of the common errors made.
Tax mistakes can be extremely costly, especially for small businesses. From failing to declare certain expenses to leaving yourself with a mountain to climb by neglecting your financial bookkeeping duties, there are many errors that can occur. Keeping that in mind, make sure you avoid some of these most common errors…
- Forgetting to include some employee benefits – This is a common mistake made by small businesses. A lot of companies remember the obvious, such as medical insurance and company cars. However, it’s the smaller perks, such as gym membership, that are often overlooked. Needless to say, these all add up so make sure you include everything.
- Leaving out capital losses – A lot of people fail to include capital losses in their tax return, as they believe it is not necessary because they won’t be paying any tax on a loss. However, you can carry capital losses forward, which can lead to further tax savings in the future.
- Failing to keep everything up-to-date – You make your life so much more difficult if you do not keep track of all your finances efficiently. You will undoubtedly end up making errors, especially if you leave everything to the last minute.
- Blurring the lines between personal and business – A lot of start-up founders experience this issue if they do not set up a business bank account. If you are using the same account for both business and personal use you can easily find yourself getting confused about your finances.
- Inputting the incorrect amount for pension contributions – Aside from forgetting about pension contributions altogether, the most common mistake is inputting the wrong amount. Business owners often pay their pensions on a net basic rate. Make sure you know the difference between the net spend and gross spend.
- Filing the tax return late – A lack of organisation can often lead to the tax return being filed late. If this occurs, you will be charged a penalty of £100. If the tax return is more than three-months late you will then be subject to further charges.
- Failing to include charitable donations – When filling in your tax return you need to include any Gift Aid contributions you have made. You will get a tax refund for this, which is significant if you are a higher rate taxpayer.
- Not using an accountant – Last but not least, undoubtedly one of the biggest errors made is failing to hire an accountant. A lot of business owners bypass this step, as they see it as an unnecessary expense. However, you could find yourself facing an even greater bill if you do not do your tax return correctly.
Hopefully you now have a better understanding of the different mistakes that are commonly made by small businesses when it comes to filing their tax return. Nevertheless, if you don’t make the final error of failing to hire an accountant, you can give yourself the best chance of making sure none of the other mistakes occur.