You have just received your tax bill for the year and are left wondering how you are going to pay it. Unfortunately, this is a situation that many find themselves in on a regular basis. So how can you prepare better for your tax bill? We have put together 5 tips on how you can plan ahead of time and avoid getting caught out.
- Keep some money separate
Open a savings account and put a little aside every month. Leaving the money in your current account makes it very easy to forget that some needs to be left for tax. So save little and often – it can make a big difference in the long run!
- Remember that not all your business income is yours
It sounds unfair but remember that the business has running costs , so not all of it is actually yours. Understanding this makes it easier to put some aside and let go of the money when your tax bill comes through!
- Use accounting software
Having software will make keeping track of your income and expenses far easier. Everything is in one place which makes getting a tax estimate and preparing your year end accounts that much quicker and simpler. Speak to your accountant who will be able to recommend good software and who may even be able to get you a discount or help you manage everything better.
- Keep your bookkeeping up to date
Once you have software, the next step is to make sure that it is kept as up to date as possible. You can then make a monthly estimate of how much your tax will be and so how much to save. For self-employed people, you will need to put aside around 30% of your profit. For limited companies it’s around 20%.
- Don’t wait for the deadline
You will still have until 9 months after your year end to pay, so get your return submitted as soon as possible! You’ll know your tax bill sooner and will have longer to save up if you haven’t got the money available at that point.
At MBS we recommend using Xero software. Xero links to your bank statements meaning that you can easily keep your bookkeeping up to date. This allows you to view your business’ position in real time and lets us work with you in looking to the future, rather than backwards.
If you would like more information on how we use Xero to benefit your business, then click here to book a discovery call.