How to prepare your business for a successful new tax year

As the 2021/22 tax year nears a close on April 5, it’s an excellent time to plan for the next one. With strong preparations, you can stress less and stay on top of your business finances. 

As a result, you won’t scramble to get your financial accounting in order when it comes time to file. But where might you start? If you’re looking for a few tips, we can help. 

This guide will cover how to prepare your business for a successful tax year, including:

1. Organise your financial accounting process 
2. Create a year tax plan 
3. Know the requirements and deadlines 
4. Seek professional advice 

Thinking about the new tax year can help you manage your finances consistently and efficiently. Let’s cover the most important tips to get yourself in order. 

1. Organise your accounting process 

HMRC expects you to record your business transactions throughout the year. So, you may want to ensure your current financial accounting process works. 

The beginning of the tax year is a great time to update and smooth out your accounting process.

Start by looking at your bookkeeping practices to assess them for effectiveness and spot habits you should swap out. 

For example, you may have updated your bookkeeping in a spreadsheet throughout the year. But if the information appeared disorganised, this system may have been more tedious than you hoped. 

Calculate your assets and liabilities  

At the start of the tax year, it’s smart to have a clear idea of what you own and owe for your company. Calculating your total assets, or business possessions, allows you to measure your value. 

While your assets add the worth of your business, liabilities are things you owe other people, such as debts. If you’re aware of your current situation, you can form reliable financial expectations. 

Form a financial forecast and budget

Financial forecasting lets you anticipate your upcoming finances. With a realistic idea of what money might come in and out of your business, you can estimate your future taxes and how you’ll meet these obligations.

See also: Budget vs forecast: what’s the difference?

2. Create a year tax plan

Once you’ve checked in with your processes, you can plan for the new tax year. 

The best way to prepare for taxes year-round is by taking time to go through your finances. Regularly updating your books helps them remain organised and accurate. 

Consider scheduling fifteen minutes a day and an hour at the end of the week to record your business transactions. Then, you may want to look over everything in depth at the end of each month to catch any duplications, omissions or errors. 

Building positive habits will save you time and effort when it comes time to file.

You may struggle to cover your tax expenses if you don’t have available cash. To avoid this, create a savings plan at the beginning of the tax year. For example, you might set aside about 20% of your profits. 

On top of this, consider ways to legally reduce your tax bill, such as donating to charitable causes for tax relief. 

While you prepare for a new year, it’s useful to consider what you struggled with during the previous one. 

Maybe you struggled with organisation or time management. Whatever it was, be honest with yourself so you can come up with solutions for a more efficient year. 

Similarly, assess what went well with your tax process. If you feel a particular system or tool was beneficial, continue with it in the new tax year. 

3. Know the requirements and deadlines 

It’s important to be aware of your tax requirements and deadlines for the upcoming year. 

First, refresh yourself on which taxes you’ll need to pay. Sole traders likely need to pay income tax and national insurance. Meanwhile, limited companies need to consider corporation tax and potentially VAT.

You may also need to comply with the Making Tax Digital government initiative. This process aims to simplify the tax reporting process and increase its accuracy. 

Here are the current self-employment rates for income tax:

• Up to £12,570 – 0% tax
• £12,571 – £50,270 – 20% tax
• £50,271 – £150,000 – 40% tax
• Over £150,000 – 45% tax

If your income is variable, you’ll likely need to submit a Self Assessment tax return to determine what you owe. Here are a few essential dates to know: 

• 6 April – 5 April – the UK tax year 
• 5 October – register for Self Assessment (if you haven’t filed in past years) 
• 31 October – paper return is due 
• 31 January – online return is due (If you file before 28 February, you can avoid a late penalty). Tax is also due on this date, but you may be able to avoid late penalties if you file before 1 April. 
• 31 July – second payment is due if you pay advance payments towards your bill. 

4. Seek professional advice 

As you think about the new tax year, you may also want to seek professional advice to improve your tax management. Finding an accountant at the beginning of the year lets you integrate their services in your business finances. 

Over the course of the year, an accountant can advise you on best practices and support you in the tax process.  

Hopefully, this guide helps you prepare for the new tax year with a long term and organised plan. Just remember to:

• Organise and update your accounting methods
• Develop a year-round tax plan
• Be aware of your tax requirements and deadlines 
• Seek support from an accountant

As you consider your tax planning, you may also want to check out our article on tax tips for small businesses to improve your process.  

Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

The Countingup app offers year-round tax estimates that help you plan ahead for these expenses. Plus, it’s Making Tax Digital compliant so you can easily share your bookkeeping with your accountant without errors or duplications.

Save yourself hours of accounting admin next tax year and focus on growing your business. 

Start your three-month free trial today.