How startups can win at tax
If you're a small business still getting over the stressful experience of filing your tax return last-minute, there's a better way to do things. Tax is changing - and the way startups need to approach filing their returns should change too. Tax isn't just for Christmas (the time around it, we mean) - it's for the whole year round. Doing it as you go along will save you lots of hassle, and so there's no time like the present to start getting your tax sorted.
One entrepreneur who's come up with an innovative solution to the tax woes of the self-employed is Dave Legion, founder of TAXO'D - an app which lets you work out your tax, sort your receipts, and even file your return. All on the go. Pretty impressive. And even better, if you register by April 5th you can get your tax return filed free through the app. Here are Dave's tips for staying on top of your tax.
It’s January 31st, and you’ve spent the best part of your morning cursing your past self for leaving you in such dire circumstances. With only 12 hours left to complete and file your tax return, you accept that you have been stitched up by yours truly. Promising that next year will be different, you begin trawling through bags, boxes and spikes of uncategorised receipts, hoping you’ve kept enough back for the mystery tax bill.
Sound familiar? I used to think I was the only one in the world who’d stitch myself up this badly. But even in the last two years, almost 2 million of us waited until this very last day to file our tax returns, and a further 176,000 missed it completely. That’s a staggering £176 million in avoidable fines.
So, now you know you are not alone, what can you do to avoid getting caught in the same situation next year?
Record as you go
It is, fundamentally, the best thing you can do for yourself and your business. We miss out on hundreds of allowable business expenses each year because receipts get lost, washed or binned. How much can you claim back off a stamp anyway? Admittedly, not a lot. But, say you post on average 50 business letters throughout the year – that’s £30 in allowable business expenses, which goes against your income and ultimately lowers your final tax bill. As soon as you make an expense against your business, record it. That way you don’t have to worry about it again for the rest of your life.
Forming a healthy habit
“We are what we repeatedly do,” said a wise man who lived in a cave, I think. The thing with good habits is they usually fall under the ‘boring’ tag; brush your teeth, keep your room clean, take out the bins. None of us leaps out of our seats to do these things, but avoid them and you will end up with a house like Hoggle and smile like Austin Powers. Healthy habits are formed to best serve you. So, when you next buy something, make this your 'habit trigger' to ask "Is this a personal or business expense?" If the latter, record it, then forget about it.
Play catch up
No matter how carefully organised we think we are, occasionally slipping off the perfectly-laid track is inevitable. The important thing is that we understand when we’re slacking and make the effort to get back on track as soon as possible. If you don’t stay on top you can find yourself weeks or even months behind, and feeling less willing to catch up by the day. To get back on track, try to set aside a meagre 10 minutes out of your day. Sit there and record as many of those receipts as you can. Repeat, until you’re back on track and you’ll know better next time.
Get a system in place
None of these tips are any good without a way to implement them. It doesn’t matter how you choose to keep your finances in order, as long it’s effortless, repeatable and you can see yourself sticking with it for the foreseeable future.
It’s okay to put off the things you don’t like doing for something a little easier and more enjoyable. But by putting off the unavoidable, such as paying your taxes, you are setting yourself up for a world of pain. Remember, record as you go. Make it a healthy habit. Play catch up. Find a system that works and don’t avoid the unavoidable. Now, when Jan 31st next comes around, you can thank your past self for giving you the day off.