Filing a self-assessment tax return can be an overwhelming task for many small business owners, especially when it’s easy to make mistakes that could end up causing penalties or missed deductions.
Which is probably why so many people put off filing their tax returns until right to the deadline – luckily it doesn’t have to be stressful. When you follow some simple rules combined with a bit of preparation, you can make sure your tax return is done correctly and submitted before the deadline.
To help you, we’ve highlighted some of the most common mistakes UK small business owners make when submitting their tax return, so you can avoid them. If you’re thinking about going digital, we’ve provided examples of how an online invoice generator, like Invoicenet, can make life even easier.
MISTAKE 1.
MISSING THE DEADLINE
One of the most frequent errors is simply missing the deadline. For most people, the deadline for filing online self-assessment returns is 31 January following the end of the tax year. Missing it can result in an automatic £100 fine and penalties increase the longer you delay.
How an Invoice Generator Helps: By staying on top of your invoicing and keeping everything organized in one place, you’ll find it easier to pull together your income records at tax time. Many invoice generators also offer built-in reminders for upcoming deadlines, so you won’t get caught out by last-minute filing stress.
MISTAKE 2
FORGETTING TO CLAIM ALLOWABLE EXPENSES
UK small business owners often overlook claiming allowable business expenses, which reduces their overall taxable income. From office supplies to mileage costs, forgetting these can mean paying more tax than you need to, HMRC provides details of what you can claim on their website at: https://www.gov.uk/expenses-if-youre-self-employed. If in doubt we recommend speaking to an accountant.
How an Invoice Generator Helps: An online invoicing tool helps you track expenses alongside your income. By entering expenses as they occur, you can ensure nothing is forgotten and it’s all easily accessible when filing your return. Some platforms, like Invoicenet, even let you categorise expenses to match HMRC’s guidelines, making the process of calculating your deductions easier.
MISTAKE 3
NOT DECLARING ALL INCOME
It’s crucial to declare all sources of income on your tax return. This includes income from freelance work, side businesses or any other earnings. Failing to report everything can lead to HMRC penalties.
How an Invoice Generator Helps: A reliable invoicing tool can track all your business income, whether from services or products, in one place. This reduces the chance of missing out on any income you need to report, as every transaction is stored securely and accessible whenever you need to review it.
MISTAKE 4
MIXING PERSONAL AND BUSINESS FINANCES
A common mistake for small business owners, especially sole traders, is failing to separate personal and business finances. Mixing the two can lead to confusion when it’s time to file your tax return, making it harder to determine which expenses and income are related to your business. One suggestion to help with this, is to have a separate bank account that’s used solely for any income and expenditure related to your business.
How an Invoice Generator Helps: By using an invoice generator to manage your business transactions, you can easily keep your business finances separate from your personal spending. This will make it much easier to track business income and claimable expenses and will help you avoid errors that could lead to HMRC investigations or penalties.
MISTAKE 5
FAILING TO KEEP ADEQUATE RECORDS
Self-employed individuals are required to keep records for at least five years after the 31 January deadline. Many business owners fail to keep accurate records, which can lead to trouble if HMRC ever requests an audit. Some thermal printed receipts can also disappear or be damaged over the years, so best practice is to have a duplicate record and it’s a good tip to keep a copy of all your accounts, just in case the hard copy or your computer gets damaged.
How an Invoice Generator Helps: A cloud-based invoicing tool securely stores details of your invoices and expenses and client details in one easily accessible place. This makes it simple to find historical records and ensures your documentation is complete in case HMRC asks for further evidence. Storing your information in the cloud also means if your computer is stolen or your paper documents are damaged, all of your data is backed up online.
THE BOTTOM LINE
Very few people enjoy doing their accounts but filing your self-assessment tax return doesn’t have to be a headache.
Having simple steps in place, to avoid the main problems we’ve highlighted, will help you feel more confident that your tax return can be completed on time and as accurately as possible. If you’re in doubt about your accounts, we suggest you speak to a qualified professional, such as an accountant, who can give you personalised advice.
By staying organised and using digital tools like Invoicenet, you can avoid the common mistakes that many small business owners make. With your invoices, expenses and income all in one place, the process becomes much more straightforward, allowing you to focus on what matters – growing your business.
If you’re procrastinating about filing your tax-return, there’s still time for us to help you get organised and it won’t cost you a penny – All our new customers currently receive 30 days for free!
