Since January is the season of the income tax return in the UK, this month will deal with some basic tax saving tips to ensure you are not paying too much tax. If you are in business, the first thing you would want to avoid is any late filling, as late fillings always come with penalties. Some of the penalties are listed below:
- Income tax – £100, then £10 daily penalty if the tax return is not filled within the following 2 months. This can mount up very quickly and continues to run until the return is filed.
- Construction Industry Scheme Tax – monthly filing is necessary to avoid a compound penalty of £100 per month per missing return.
- Companies House penalties start from £150 and can climb to £1500 depending on how late the accounts are filed and whether they have been filed late more than once.
- VAT – penalties start at 5% of the vat on the late vat return and can climb to 15% of the vat on the late return.
- Partnership tax return – penalty of £100 per partner
- Corporation tax return – £200 late filing penalty
Imagine how much money can be wasted, if the business or the accountant is not organised enough to file by the deadlines! No business can really afford to be in this position, so being on time is vital to the health and wealth of the business. Late filings can also trigger alarm bells to HMRC, as a disorganized business is likely to be making mistakes in other areas too. The business may well get a visit from HMRC if they are consistently late with filing.
Of course, being prepared also means that the business will know well in advance what their tax liabilities are going to be and so will have saved so as to pay on time too. Tax needs to be planned and one likes a last minute, unexpected bill.
This may appear to be very basic to many in business but as an accountant, I see many businesses unprepared for a tax bill and once a business is in arrears, it can be difficult to catch up. If businesses can work closely with their accountant and take the right advice, it makes not only their lives easier but also eases the stress on the accountant, having to break the bad news to the client.