4 tax tips for new business owners
New business owners have a lot on their plate. That means it’s easy to lose track of an approaching tax deadline or financial data needed to submit their return.
Organisation is key when preparing for tax time. It is also worthwhile to take advantage of the many tools and resources out there to support new businesses.
Set yourself up for success by following these four steps:
1. Commit to clean bookkeeping from day one
Year-round, effective bookkeeping is the best way new business owners can minimise tax season stress. With the wide range of cloud accounting software out there, there’s no reason to rely on time consuming manual methods that leave room for error.
All-in-one options like Xero, QuickBooks and Sage automate your most important bookkeeping processes, including:
- Tracking expenses
- Tracking sales and income
- Creating and sending invoices
- Managing inventory
With your financial records all in one place and up-to-date, you’re better positioned to maximise your refund, while avoiding penalties associated with incorrect or incomplete tax returns.
2. Capture every business expense
Each year, a significant percentage of business owners claim less than half of their business expenses. This is often because they don’t have a reliable system for documenting expenditures while on the go.
Without carefully logged receipts, entrepreneurs must forfeit valuable tax deductions, resulting in a loss of cash they could be investing back into their business.
Mobile apps such as Autoentry, Expensify and Receiptbank are ideal while on the go. They can be used to record receipt data, track mileage and generate expense reports. As an added bonus, most of these tools sync with your all-in-one accounting software.
3. Separate business from personal
Right from day one, small business owners should clearly divide their personal and business expenses. Differentiating between the two will make it much easier to claim deductions on your tax return – and support those claims should an audit or HMRC enquiry occur.
We recommended these steps to separate your business and personal finances:
- Create a separate bank account for your business, and designate a credit card solely for business purposes (this will help you track expenditures while building up your credit and borrowing power);
- Never combine business and personal expenses (for example, if you buy printer ink for your home and your business at the same time, ask for two separate receipts);
- Pay yourself a set salary from your business account each month (this will help you determine how your income, as well as the business, will be taxed).
4. Consult with an accountant
Not sure exactly what you can claim as a business expense? Wondering which accounting software will suit you best? We’re here to help!
The team at MHA Carpenter Box believe cloud technology is key for the future of businesses. Our dedicated cloud accounting team has specialist knowledge of the ‘all-in-one’ systems and can help you find your perfect tailored solution. They can also provide system implementation, training and support if you need it.