Firstly, you will have to work out how much of your profits are taxable so you will need to keep good records of the money that comes in and goes out of your business. Make sure you keep these records as you go, especially because failing to do so could result in an unwanted fine. The standard records should include any sales and takings as well as your purchases and expenses.
It’s wise to keep hold of any relevant paperwork and electronic documents such as cashbooks, invoices, mileage records, bank statements and receipts. You should also keep track of any money taken out of your business bank account for personal use, as well as amounts paid into the business from personal funds. It’s important to keep back up records of all your financial paperwork such as invoices and bank statements to show where the income came from. HMRC requires you to have easily accessible business records so make sure you have back-ups, particularly of digital documents, as technology can’t always be 100% relied upon!
Finally, you will need to fill in a tax return form every year and make sure you pay your tax on time – if you don’t, you may be charged interest and penalties by HMRC. For tax returns not filed online by 31 January following the end of the tax year, there is an automatic penalty of £100 even if no tax is due. If the return is still not submitted by 1 May, penalties of £10 per day are charged for 90 days. There are also late payment charges to consider so it is vital you keep on top of your tax obligations!
For more advice on taxes, call Butterworth Barlow on 0151 493 9700 or visit www.butterworthbarlow.co.uk