Thanks to Mike Best, from Mike Best Accountants for this weeks guest blog.
Starting a new business? Don’t get caught out with your taxes!
Given the start of the new tax year, it seems to be a popular time for people to start a new business, maybe currently more than ever, as a bit of confidence returns, and people look at their options.
However, did you realise that if you start a new sole trade or partnership business, and send your first invoice today, or retail something online, and get some money in today, it will be around 12 months before you must pay income tax on that sale?
For new limited companies, whenever you start, your first corporation tax payment could be up to 21 months after you’ve made that sale!
A little bit different to working in a job, getting your taxes deducted monthly and then the rest of yours to spend without worry.
If you’re VAT registered and charge VAT, don’t spend that either, that money is not actually yours, although they won’t wait half as long for their money (generally three months, can be up to six months initially, depended on when you register and when your first return is due)
So, set up an additional bank or savings account to run alongside your main business account. Transfer a % of your income into that and let it build up as a “Tax Account”. So, you’ll have no problem when the taxes are due and, if your tax is less than you saved, you may even be able to pay yourself a bit of a bonus.
The developments of cloud accounting software these days make it easy for businesses to keep track of their finances, the days of not knowing until nine months after your year end, or 31st January when your last-minute tax return is being finalised, are well and truly in the past.
It makes planning and preparing for your taxes easier than ever before and, if set up right, it is possible these days to have a good idea a few days after your year end, of where you stand from a tax and finance point of view.
As with many things, good planning and preparation are all important.
For more information, please contact Mike Best on 07703 102260 or 07396 305806 or email him at [email protected]
