3 Mistakes That Kill New Business

Managing financial challenges is often the hardest part of starting your own business. If you can’t handle your money properly, you’re going to run into so many issues and it could mean the end of your business entirely if you aren’t careful. One of the things that new business owners struggle with most is their taxes. Filing taxes for a business is so much more complicated than filing a personal tax return and if you get it wrong, you’re likely to get fines which will put you in a bad financial position. If you’re just starting out and you’re having trouble getting your head around all of the tax issues you need to deal with, it’s important that you avoid these common mistakes.

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Expenses

Business expenses are tax deductible so it’s important that you’re claiming everything that you’re entitled to. If you’re moving your business into an office, you can claim the rent and energy bills as tax deductible. Any wages that you pay to your employees, any money that you spend on infrastructure, and all of your manufacturing and shipping costs are also tax deductible. It’s important that you know exactly what you can claim on your expenses, otherwise, you’ll end up paying more tax than you need to.
However, it’s equally important that you understand what you’re not allowed to claim. If you go overboard and start putting down personal items and trying to claim for those, you’re likely to be investigated. If the investigation finds that you’re claiming items that aren’t tax deductible, you can quickly end up with fines. If you’re not sure, it’s best to do a bit of research and contact HMRC to check whether your claim is legitimate or not.

Changes To The Filing Process

The HMRC are always making changes to the filing process to make it easier for businesses to do their taxes. If you’re not aware of these changes and you end up filing your taxes in the wrong way you could end up with penalties, even if it was a genuine mistake. The latest change that they’ve made is the Making Tax Digital for VAT initiative. All businesses that have a turnover of over £85,000 are required to keep digital records and file their taxes online. It’s important that you start keeping those records now, otherwise, you won’t be able to file taxes correctly next year.
Employee Status
Employee status is becoming an increasingly tricky issue with the rise of remote workers and freelancers. If you’ve got full-time employees, it’s fairly simple. But when you’re using freelancers, there is a bit of a grey area. If they’re considered self-employed, they’ll file their own taxes and you don’t have to deal with it. However, the HMRC might have a different idea of what self-employed is. If you’re not deducting taxes from an employee because you consider them self-employed but the HMRC consider them an employee of yours, you’ll get penalties. There are a few different ways to work out whether they’re an employee or not. One of the main things to consider is whether you can dictate their working hours. If you can, they’re considered an employee. If you’re unsure, it’s best to consult an employment lawyer. If you’re making these tax mistakes, it’ll be up to you to foot the bill and that is going to land you in financial trouble during the early stages of your new business.

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