Do I need an accountant?
We’re often asked by small businesses if they should employ an accountant. The answer often depends on the type of person you are and the type of business you’re running.
It’s a good idea to employ an accountant if your tax affairs are complex but many sole traders don’t necessarily need to go to the expense of an accountant. You can save yourself several hundred pounds per year if you’re organised and don’t mind doing a bit of research. It’s easier than you may think to get to grips with it using our practical tips.
1. Deciding Your Tax Year
If you are starting up and deciding on your tax year, it’s simpler and will save time filling out the paperwork, if you run your financial year in line with HMRC’s – 6th April to 5th April
2. Tax Return- DIY!
Tax returns can be much less daunting than they look. Particularly if your turnover is less than the £77,000 threshold, you can fill in the shorter version of the tax return. (see http://www.hmrc.gov.uk/worksheets/sa210.pdf for more information on whether you are eligible for the shorter version)
It’s helpful to take a look at the form first so you know what kind of information you’ll need to supply. The forms can be downloaded at: https://www.gov.uk/self-assessment-forms-and-helpsheets
These guidance notes contain really helpful information for example, how to calculate your income and expenditure figures and what expenses are allowed: http://www.hmrc.gov.uk/worksheets/sa103f-notes.pdf
Make sure you fill in any of the supplementary sheets that apply to you: “self employment” or “partnership” for example.
Even if you decide you want an accountant to submit your tax return, you can save on costs by preparing a draft of the form for them to check over.
3. Keeping Proper Records
Sorting out your expenses receipts
Make sure you keep all expenses receipts. If you’re organised you’ll file them straight away. If you’re like me, you’ll shove them all in a big pot to deal with later.
If your annual turnover is below £77,000 (as at 2013) you do not need to provide HMRC with a break down of the different types of expenses. You can just put a total figure on your tax return. So you can just go through the receipts and add them up. You don’t need to number them or type them up, you can just write down the total figure for the year’s expenditure.
Having said that, it can be handy to keep tabs on what you’re spending in different areas so if you are really pushed for time or if you have a large number of receipts, you could pay a book-keeper or admin assistant to do this for you.
If you use an accountant to do your tax return, you can still save money by providing them with this total figure instead of paying them to deal with your receipts.
Don’t forget to include expenses that you might not have paper receipts for such as direct debits and online purchases.
Keeping track of your sales
You should try to make a note of all your sales and other income as you go along. Invoices that you issue should be numbered.
You should include a note of other types of income and sales that may not be invoiced or go through the till such as: money paid into the business from personal funds or goods or services taken for you or your family or to pay someone in kind.
Know Where Things Are!
It really helps save time if you can keep the following together in one place, so you have it all at your fingertips when it comes to doing your year-end figures:
- Bank & credit card statements
- All correspondence from HMRC
HMRC provides more details about what records you need to keep: http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm#4
4. Ask for help
Don’t forget you can ring HMRC and ask for help with record-keeping and filling in your tax return. And it’s free. Contacts are here: http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=OILdX1VAnlM
5. Get your money’s worth
If you do decide to use an accountant, it will increase your knowledge and understanding of your business if you ask them to explain how they have worked things out. Rather than leaving it all to the accountant, if you take ownership of your finances, you are likely to make wiser decisions and make more money in the long run. It may also give you more confidence to do your own tax returns in future years.