Join my FREE business growth workout!

And I'll show you how to grow your business, work less and make more money with proven strategies that work right now...

  • get more clients without cold calling
  • reduce costs, without cutting service
  • know your numbers, without knowing numbers
  • what tools to use to make you more productive
  • Plus much, much more

Get Instant Access To My Free Business Growth Workout

Work With Me

You, Me, Big Results.

Learn More →

Blog

Regularly updated straight from the vine

Learn More →

FREE Resources

Not your average Business Toolbox

Learn More →
Home » Random

20 Days To Build A Better Business: Day 4 Start Tax Planning Now

20 Days To Improve Your Business

This is Day 4 of the  20 Days To a Better Business series. In this series we look at tips and strategies to take your business to the next level. This week we are going to focus on why the time to start planning for taxes is now.

You can catch up here with the other posts in this 20 Days To a Better Business series .

This is Day 4: Start Tax Planning Now

As Mark Twain famously once said:

“The only two certainties in life are death and taxes.”

In the UK the end of the tax year is fast approaching (5th April), although for many businesses, they draw a close to their financial year at 31st March. In the US the fiscal year runs from 1st October to 30th September. Although individuals can opt for thier own tax year subject to IRS approval.

The point of all of this, is that these dates are fixed. Once the hammer is down on your year end, there is very little time to do anything about it.

Essentially tax is paid on the taxable profits of your business and not the accounting profits of your business.  For a number of reasons taxable profits (the amount on which tax is due) may be higher or lower than the accounting profits.  This is because accounting rules are designed to represent the business as a going concern (i.e. assuming that the business will continue to trade). Whereas the tax authorities base the tax charge on a point in time.

There are two very important considerations that you need to note around tax:

  1. the absolute amount that you pay
  2. the ability to pay it

Many businesses make the mistake of thinking that the amount of money that they having in their bank account is theirs to spend as they wish. Sadly, this is not the case and unless you can pay the tax on time you could face penalties, including fines and prison sentences and interest payments.  In the UK tax is due for companies 9 months after the financial year in which it was earned. Which whilst it does give you a cash benefit of upto 9 months, it means that opportunities to minimise tax in the following financial year could be hindered.

Here are 5 things you could consider to minimise your tax position this year:

  1. Start planning for retirement
    Paying into a retirement account is usually allowable against tax and so if you haven’t got any plans for retirement, then now may be the time to consider taking professional advice.
  2. Know your tax law
    Tax law generally changes each year, with new allowances, new rules and closing down practices deemed to be tax avoidance. Equally Tax Law is very complex and it may be worth taking specialist tax advice to come up with a plan for you.
  3. Start saving
    If you have been in business a little while then you may have an awareness of how much tax your paid last year, so putting the equivalent percentage of your income away into a savings account will help minimise cash flow worries when it comes to having to pay the cash over. If you have over provided, then so much the better.
  4. Accelerate Big purchases
    If you know that you’re going to need an item of equipment or materials in the first couple of months in the next financial year, then you could bring your purchase forward, even if it means that you have to use a credit card to do it. The other advantage of this is you might be able to negotiate better pricing from your suppliers by bringing the purchase forward or timing it near their year or quarter end.
  5. Get an Accountant
    Knowledge of Tax Law is a complex business and unless you’ve got time on your hands or you suffer from insomnia, it probably isn’t for you. Consequently having a good accountant can save you many times their fees in saved tax. Which comes from not only from knowledge of Tax Law but experience of other businesses in the same position as you.  When you’re in the market for an accountant, first seek recommendations from other people in your line of business, but don’t just go on price. Secondly, make sure you meet with your accountant at least a month prior to your end of year.

4 Comments »

  • Patricia@lavenderoils said:

    Hi Matthew

    Our tax year finished 30th June but I have already started recording all my credits and debits in Excel and will use my brother’s accountant. As this is my first year in business I am learning heaps and on my small biz management course we had a tax consultant from our tax office spend a day with us. We also have access to them visiting us at home and giving us assistance too.

    Trying to stay organised so when it is time to submit my tax forms, won’t be a big task. Keeping accurate records is making it easier each month for me to see how my business is growing and progressing. Thanks for the reminder of this important part of a business Matthew. Appreciated.

    Patricia Perth Australia

  • Matthew Needham said:

    Hi Patricia, When I looked up the end of tax year dates I was surprised to see such a wide variety of dates around the world. It’s really good that you’re on top of your records as it’s then not such a drag at the end of the year. As your business grows the timings as to when you make purchases, such as investments in eqipment could make the difference between you paying tax and not paying any.

    Thanks for the comment, Matthew

  • Anne Sales@ Coupon Codes said:

    Hello Matthew, I’m just starting working at home and this post is going to give me a great head start. It’s absolutely crucial that I learn about taxation and stuff before they penalize me for being ignorant of the law.

  • Matthew Needham said:

    Thanks for the comment Anne. Getting a grip early will also help you grow your business, by investing money in the business you’ll start getting returns much quicker. Get that knowledge as soon as you can! Matthew