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Financial issues that keep you awake No.2 – Being as tax efficient as possible

Trying to be as tax efficient as possible is a big concern keeping business owners awake.

 

That’s according to KPMG’s survey of 250 business leaders, where it placed 2nd on the list of financial issues depriving entrepreneurs of sleep.

 

10.9% said it is a current issue but haven’t addressed it yet.

 

28.9% said it was a current concern they’re working to resolve.

 

25.9% had it as a previous concern, now resolved.

 

So out of all 250 respondents, only 34.2% didn’t worry about being tax efficient.

 

It seems a bit strange too, as other tax-related concerns, such as filling out tax returns correctly and on-time are considered a very low priority issue.

 

I think the problem here isn’t so much the businesses not being tax compliant, but just feeling that they’re paying too much tax.

 

They could be in the wrong tax bracket, or know they’re missing out on certain tax breaks that would save them a lot of money.

 

Without bringing it up directly, there are many accountants who probably wouldn’t think to go the extra mile and research how a client could pay less tax.

 

They’d just believe that keeping the client tax compliant was enough, and that would constitute “doing their job”.

 

If you feel this is the case, then maybe your accountant isn’t right for you.

 

A really good accountant should use their experience to know what relief you could be entitled to.

 

Depending on the size of your business, it’s geographical location, and the industry you trade in, you could be paying incorrect business rates to your local council.

 

Would you know if you qualify for tax relief through capital allowances, research and development, or by being considered part of the creative industry?

 

Many don’t, and end up paying too much.

 

One of the case studies on the report is from a happy business owner who got a second opinion: “We changed from LLP to LTD as format was resulting in extremely high tax bills. Suggested by new accountant and the new structure suits our company much better.”

 

Which goes to show, it can’t hurt to ask.

 

And if your accountant can’t help, perhaps find one that can:

 

https://www.madenotborn.com/accountancy/

 

David

6 free tips for business accounting

Blatant plug today.

We’ve updated our website to include our brand new courses, starting with the Guide to Accounts for Small Businesses.

It’s packed full of useful info so you can keep your finances nice and tight:

 

  • How to calculate your break-even point
  • Calculate a cash flow forecast
  • Calculate a profit and loss forecast
  • Calculate a balance sheet
  • Recommended accounting software
  • Managing your cash flow

 

AND it comes bundled with ready-made Excel spreadsheets for each of the financial forecasts, so you won’t even have to work anything out yourself.

Yours for £9.99 so it’s more than worth it.

BUT if I was you, I’d download our free six tips for accounting first just so you really get your money’s worth. Here it is:

https://www.madenotborn.com/guide-to-accounts/

David

A taxing situation

A friend of mine unfortunately got a tax bill of £6,000 recently. Ouch.

 

He wasn’t expecting it.  HMRC sent him this little surprise in addition to his usual income tax from his steady job, so he thought he was all square with them.

 

However, it turned out it was because of a second property he owns.

 

Even though he’d declared the income he gets from it, such as the rent from his lodger, he hadn’t declared any expenses.

 

HMRC wrongly thought he was simply coining it in and needed cutting down to size, so to speak.

 

Even though HMRC should issue a refund once the right self-assessment figures are in, I think that for a new business that would be crippling.

 

You could easily end up using any spare cash in your business to pay off your (incorrect) tax bill, leaving nothing left for the day-to-day running of your company until the refund comes through.

 

Which could take a while, if you’re especially unlucky.

 

Getting a self-assessment tax return wrong is easily done, but annoying to fix. Even if you get your money back nice and quickly, there’s still the hassle of re-calculating your taxes and calling up HMRC to chase it up.

 

Hassle you can do without when you’re trying to run a business.

 

The easiest thing to do is get it right first time – either yourself, or by getting an accountant to do it for you.

 

We have both solutions covered right here:

 

http://www.madenotborn.com/accountancy/

 

David