Most Common Tax Mistakes Made by Bristol Businesses
Filing your tax return can be one of the most stressful parts of running your business. If you’re a sole trader, limited company based in Bristol, making even the smallest error on your tax return can lead to costly penalties, possibly causing HMRC investigations in the future.
To help you stay compliant and stress-free, here are some of the most common tax mistakes businesses in Bristol make, and how you can avoid them:
1. Submitting Your Tax Return Late
The most common, and obvious, tax return mistake is missing the deadline completely. Filing late is a surefire way to get hit with penalties, regardless of whether you owe any tax or not.
Many Bristol business owners are often working across several ventures or juggling multiple responsibilities, making it easy to forget deadlines, and the longer you miss it, the larger your fines will be.
How to avoid it:
Get ahead of tax deadlines by setting calendar reminders months in advance, or better yet, leave it to the experts and work with an accountant who can file your tax return on time, every time.
2. Not Keeping Accurate Records
Good record keeping is essential for a complete tax return, but lots of companies fail to track their day-to-day income, expenses, or receipts. This causes messy bookkeeping and could mean your tax return isn’t accurate.
You’ll struggle to prove you’ve spent your money in areas that are allowable for tax relief if you don’t have access to real records.
How to avoid it:
Keep track of your income and outgoings by using accounting software or cloud-based programs that record transactions in real-time.
3. Forgetting to Declare Some Income
Leaving out income on your tax return is a big no-no. Whether it is a secondary project you’ve been working on, another stream of revenue coming in, or even money you’ve earned from overseas.
You should always double and triple-check you haven’t missed anything from your tax return, as any accidental omissions can lead to serious penalties and damage your business reputation.
How to avoid it:
Double-check all income streams before submitting your tax return and ensure nothing is missed, no matter how small.
4. Mixing Personal Expenses with Your Business
For sole traders, combining money from your personal bank account and your business account is a mistake that’s made by many people, and because it’s so common, they don't see it as an issue. However, this can complicate your tax return and make it harder to identify allowable expenses.
It also leaves you vulnerable if you’re ever selected for review by HMRC.
How to avoid it:
Open a dedicated business bank account. That way, you can keep your personal and work expenditures separate.
5. Making Claims You’re Not Entitled To
Overclaiming or underclaiming expenses on your tax return is a serious issue. Some people aren’t actually aware of what they can and can’t claim, so as a result, you may end up paying more tax than you should.
How to avoid it:
Make sure you’re only ever claiming what you’re entitled to, and if you're not sure what that is, get in touch with us today and we can guide you through it.
6. Not Registering for VAT On Time
If your annual turnover exceeds the VAT threshold, you’re required to register for VAT, and many developing businesses tend to overlook this as their turnover increases. In some cases, businesses may choose to register voluntarily earlier to avoid missing deadlines and potential penalties.
How to avoid it:
Keep an eye on your earnings, and once you start to approach the threshold, register for VAT.
7. Falling Behind on Tax Updates
UK tax legislation is constantly evolving, and it can be difficult to keep track of what you need to remain compliant. Understanding HMRC updates is important and the onus is on the taxpayer to keep abreast of changes.
How to avoid it:
Tax research can be time-consuming, so leave it to the experts. By using an accountant, you can rest easy knowing your business is up to date with regulations.
8. Leaving it Until The Last Minute
Finally, don’t leave it until the last minute. If you wait until the night before your tax return is due to be sent off, you’re likely to make mistakes. Furthermore, if you submit before the 30th December you can actually pay by installments through your PAYE code. Also, planning early will give you a clearer idea of your cash flow for your tax bill.
Even the smallest error such as a typo, miscalculation, or missing information can cost you. HMRC will generally only charge interest on corrections made after 12 months post submission, but that does mean if HMRC are late to realise the error, you may be required to pay those penalties.
How to avoid it:
Tax preparation can take longer than you think, so begin as early as possible. That way, you have plenty of time to revisit what you’ve done and pick up any errors.
Conclusion
Submitting your tax return accurately is extremely important for your business. The small errors stated above can be easy to make but equally as easy to prevent, and implementing strong processes and getting support from a professional can save you from making mistakes.
At Phinch, we’re passionate about helping local businesses succeed. We can help you submit your tax return correctly, saving you time and giving you complete peace of mind that you are 100% compliant with HMRC.
