By Jess Jensen, Product Management – Compliance Knowledge

As the end of the 2020-2021 tax year approaches, small business owners across the UK will be thinking about the year ahead and getting their accounts in order in the coming months.   According to new research from Sage*, almost a quarter (23%) of people who dream about setting up a business worry about managing the paperwork and getting their head around compliance. There is big gap between the reality experienced by business owners as only 11% say this is an actual issue for them. So how can those who are starting out put their minds at ease?  Here are five ways that small business owners and the self-employed can get ready for the new fiscal year.

1. Start early 

While the tax return itself isn’t due until next January, now is the best time for small business owners and the self-employed to make sure their accounts are in order and they have all the information they might need. Doing so will make the tax return process so much easier in the long run.  should make sure that they complete their tax return by Christmas so that they will have the whole of January to double check it and rectify any mistakes before the 31^st January deadline. This helps lower work-related stress over the festive period and will help them better manage their workload when they kick start the new year in January.

2. Schedule deadlines in the diary 

At the beginning of the fiscal year on 6^th April, small business owners should take the time to schedule important dates in their diary such as submission and payment dates for self-assessment and any other taxes such as VAT or CIS returns. should also set up reminders before the deadlines so they have enough time to get all their accounts in order before the deadline. It’s also worth checking the HMRC website for any changes to deadlines because of COVID-19.

3. Get help from an expert 

People who decide to outsource their tax returns to an accountant should make sure they give them plenty of notice so that they have time to go through their accounts. According to Sage’s research, 54% of aspiring business owners think that they need to have knowledge of accountancy. Those who decide to manage their finances themselves, can fill in their tax return and then get an accountant to check it before submitting it. There is no right or wrong approach to how you work with your accountant. Talk to them and work out what solution is right for you. It’s also possible to book a business health check with a professional every month or quarter to make sure the records are all in good working order and to make sure the business is in a healthy position in terms of things like profit, cash flow and viability.

4. Getting on top of paperwork  

Keeping up to date records throughout the fiscal year helps make life much easier. Regularly scanning receipts for expenses, recording transactions, and reconciling the bank balance saves the headache of letting all these tasks build up. It will also give business owners a clearer understanding of business performance and a better handle on their cashflow which is vital. Hiring a bookkeeper may help lift the load and free up time for business owners to focus on building their business and making sales.

5. Move to automation

The investigation from Sage has found that those who dream about starting their own business overestimate the project management and planning (58%) and digital skills (48%) required to start a business. Tax software is now becoming smarter, it can provide small business owners with greater control and insight and help them to keep track of their income and expenses even if they’re not very digitally savvy.  By connecting the software to a business bank account it’s even possible to get a real-time view of the company cash flow.

Using tax software can also help automate the process of calculating and submitting tax returns. If small businesses owners are already complying with Making Tax Digital (MTD) for VAT they will be used to keeping digital records and submitting VAT returns electronically. But those who are voluntarily VAT registered should be aware that they will also be mandated to comply with MTD from April 2022. They should therefore consider getting ahead of the curve and capitalizing on the benefits of automated software today.

The sheer volume of work and the tendency for small business owners to leave tax returns to the last-minute means that they can find the period leading up to 31 January hectic and stressful.  But some businesses are now well ahead of the curve, thanks to better processes and by using the software and tools available online.

With finely tuned processes and technology in place, business owners might even finish their tax returns ahead of time, leaving them time to focus on working on their business, not in it.

* Sage commissioned a small business market research conducted by Edelman Data Intelligence during December 2020 and January 2021. In total, 2,568 people were surveyed, including 778 business owners and 805 aspiring entrepreneurs thinking about starting their own business.