Business has too much on its plate. One thing to watch out for is your taxes. That is where HMRC-ready comes in. HMRC is Her Majesty’s Revenue and Customs and is the UK tax department. HMRC-readiness is preparing yourself for whatever tax requirements are coming your way. It prevents you from paying penalties and charges, and keeps your business compliant all year round.
Here, we will share simple steps to get your business HMRC-ready all year round. We will discuss what type of habit you can possess to keep your business prepared for tax season all year long.
What Does It Mean to Be HMRC-Ready
Being HMRC-ready means your company is prepared to deal with taxes at all times. It means you keep your books up to date, pay your taxes on time, and follow all tax rules as laid down by HMRC. When your business is HMRC-ready, you never get last-minute stress or unexpected tax bills.
In short, HMRC-ready is your business having your affairs and tax in order, so you’re not stressed when tax is due.
Why Be HMRC-Ready?
There are many reasons why you should be HMRC-ready:
Penalty Prevention: If you owe HMRC money because you’re in arrears with your payments or because you got it wrong, HMRC will impose penalties. Being HMRC-ready prevents this.
Less Anxiety: You’ll never have to worry about a last-minute shock service or issue if you’re tax-ready and HMRC-ready.
Better Cash Flow: You can pre-budget for your tax liability, and this will make you more cash-rich in hand.
Reputation for Trust: Being HMRC-ready is testimony to your company being professional and trustworthy.
Now, let’s observe the steps to be HMRC-ready throughout the year.
-
Maintain Correct Financial Books by keeping accurate and detailed records of all financial transactions.
The first thing that you will do is keep your financial records updated. If your records are updated, then it will be simple for you to prepare taxes, and they will not be erroneous.
Here’s how you can keep your records up to date:
Record Income and Expenses: Keep a track of all the money that you receive and spend. You can use accounting software or even a spreadsheet.
Save Invoices and Receipts: Save each receipt and invoice for whatever your business purchases or sells. This will help you when you are getting ready to file your tax return.
Money and business are separated: Conduct all business transactions through a business bank account. This will keep your business expenses in line.
Having an accounting computer program, such as QuickBooks or Xero, will enable you to do everything for you on autopilot.
-
Know Your Tax Deadlines
The second crucial step in getting yourself HMRC-ready is to familiarise yourself with your tax deadlines. HMRC has very precise tax return filing dates as well as tax payment dates. Not meeting these will attract penalties.
Some of the most crucial deadlines to take into consideration are presented below:
Self-Assessment Tax Returns: If you are self-employed, you would be required to send in your tax return by 31 January of each year.
Corporation Tax: Company directors must send their tax return within 12 months after the accounting period ends.
VAT Returns: If you are VAT registered, you will be required to send in VAT returns every 3 months.
Leave notes on your computer or mobile phone. Or, if you use an accountant, you can request that they remind you.
-
Pay Taxes In Time
Pay taxes on time, which is the most critical to be HMRC-ready. Late payment of taxes will attract interest or a penalty from HMRC.
Below are some tips on paying your taxes on time:
Save for Taxes: Save a bit of money every time you sell or receive money.
Maintain a Business Bank Account: Keep personal and business cash apart. This will enable tax payments to be traced.
Create a Payment Plan: If you can’t afford to pay your tax inabout one lump sum, contact HMRC and ask them how you can set up a payment plan. They will allow you to pay in parts more cash.
Through planning and tax budgeting, you will be successful in evading last-minute catastrophes.
-
Stay Current with Changing Tax Laws
Tax laws and regulations can be written every year, so it is best to educate yourself. Without being current with new tax laws, you can be committing errors that are draining your business.
How to stay updated
HMRC Announcements: HMRC makes announcements from time to time about changes in tax law. Ensure you check on their website from time to time so that you are aware of what is going on.
Ask Your Accountant: Accountants are best placed to inform you about tax law. They will inform you about a change that will impact your business.
If you do not have an accountant, hire one and stick to any change.
-
Prepare Your Tax Returns Properly
If you are required to prepare your tax returns, you’d prefer doing it the correct way. Your returns might be held responsible for delays, penalties, or more work from yourself if they are prepared in the wrong manner.
This is how you can prepare your returns the correct way:
Double-Check Your Numbers: Double-check your numbers properly before submission. Make sure all your expenses and incomes have been counted.
Keep Your Supporting Documents: HMRC can require proof of your spending. Keep every single receipt, invoice, and other business spending document.
Get Help If Necessary: If your tax return is complex, then don’t be afraid to employ the services of an accountant. They will ensure that everything is in order.
If you read slowly through what you have written down, you won’t mess up your tax return.
-
Organize a Payment Plan for Your Tax
If you owe a lot of tax, it is best to organize a payment plan with HMRC. HMRC will accept an instalment payment of tax by firms.
How to Organize a Payment Plan
Get in Advance Contact with HMRC: If you do not think you will be in a position to pay your tax, get in advance contact with HMRC. Please do not leave it to the last minute.
Let HMRC Know What’s Going On: Let HMRC know what’s going on in your situation truthfully. They may be able to assist you.
Stick to the Plan: If you do accept a payment plan, ensure that you pay the amount settled on time.
This will prevent you from being penalized and get your city business up to full steam.
-
Accounting Software
You can struggle to do your business accounting by hand. It’s simple to stay on course with accounting software. It will track your income and expenses automatically and prepare taxes for you.
The most common accounting programs are:
QuickBooks
Xero
Sage
FreeAgent
These programs keep you organized with your records, and it is less of a hassle doing your taxes. They also allow you to track your cash flow and financial problems before they become an issue.
Conclusion
It doesn’t necessarily have to be hard to get your company HMRC-ready. Staying current on records, being timely as it relates to taxation, and up to speed on tax law can get your company ready for tax season all year long.
Remember, saving yourself stress and time is being HMRC-ready. You may employ the services of an accountant if you do not know how to file your taxes and remain compliant. All these things done will keep your business HMRC-ready at all times.
FAQs on Being Staying HMRC-Ready
-
What is HMRC-readiness?
HMRC-readiness is in preparation for tax time year-round. It’s staying current on your books, paying taxes on time, and keeping your business compliant with all the tax laws.
-
Why do I need to be HMRC-ready?
Being HMRC-ready will protect your business from penalties and fines. Being HMRC-ready puts you in control and allows you to be well ahead of taxes.
-
What if I submit a tax return late?
If you’re behind, you need to ring HMRC straight away. They may be able to waive penalties or arrange a payment plan.
-
How can my accountant make me HMRC-compliant?
An accountant can assist with the submission of the tax return, issue reminders for deadlines, and inform you of all the regulations. An accountant will also alert you to tax law changes.
-
How do I keep the best track of my business’s finances?
The most efficient and simplest way to track your business’s finances is by using accounting software. It will update the records automatically and keep you organized.