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Tax Filing Tips for Small Businesses

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Last editedFeb 20212 min read

How to file business taxes

Whether you’re registered as a sole trader or a limited company, tax season can be especially stressful for small business owners. Unfortunately, it can be made even more confusing as the business starts to grow and you have more income and outgoings to keep track of. However, the government’s new Making Tax Digital scheme is designed to make things simpler and to help small business owners move their accounts online.

Filing a company tax return

The first step in filing a company tax return is making sure you’re registered with HMRC. If your business is new, you may not yet have taken this step, but it’s important to do so well in advance of tax season as the process can take some time. You can register your business for corporation tax and PAYE at the same time if you go via Companies House, but you may have to undertake these processes separately if you choose to go via post, rather than online.

You should register your business within three months of its launch, and you’ll need to supply your registration number and your accounting periods. You’ll receive a Unique Taxpayer Reference (known as a UTR) that you can use to access the online portal for corporation tax.

The process is similar if you set up as a sole trader. You’ll still need to let HMRC know that you’re self-employed and you’ll need a UTR in order to file a self-assessment tax return each year.

How to file a tax return online

When it comes to how to file your business taxes, you’ll have to decide whether you want to submit your return yourself or enlist the help of an accountant. While you will have to pay your accountant a fee, you may find that it works out better economically because your accountant may be aware of tax relief and allowances that you might otherwise miss out on. You can also have a consultation with an accountant before you decide how you want to go forward to get an idea of what works best for you.

Once you’ve registered with HMRC, you can file your tax return online. This is often quicker than completing a paper form and it also comes with a later deadline. It also makes it easier to keep track of your tax returns because they’ll be saved in your online account, and you’ll also get an automated record of your payments and any outstanding amounts owed. Remember, you’re required by law to keep tax records even after the bill is paid.

Corporation tax late filing penalties

It’s important to know that there can be financial penalties for missing the deadline for filing your tax return – even if you have a reasonable excuse. HMRC does have some discretion in this area, so it’s always worth calling to speak to an agent if you’re struggling for time, but the safest plan is to get your return in early.

Corporation tax late filing penalties can be larger than other penalties, with up to £100 for falling a day behind the deadline; another £100 for the next three months; and then 10% of your estimated bill from six months onwards. Sole traders also face penalties for late filing, but this typically starts from three months after the deadline – although there are separate penalties for paying late.

Claimable expenses

Expenses and allowances can make a significant difference to your tax bill, so it’s important to understand what you can claim back. This includes assets you buy for your business, such as tools or equipment, as well as money that’s been invested into certain types of development. An accountant will be able to advise you on tax relief available to your business, while you can also check out the gov.uk website or call the HMRC helpline.

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