7 tax tips for new business owners

Self-employed people are legally responsible for paying their taxes to HMRC and have to submit a Self Assessment tax return each year. 

The taxes you can expect to pay include:

• Income tax
• Dividend tax – limited companies only
• National Insurance 
• Corporation tax – limited companies only 
• VAT – VAT registered businesses only 

Do these things to get your taxes right from the beginning. 

A business current account is like your personal bank account but only for your company-related financial activity. 

Keeping your business and personal finances separate will save time during tax season. 

Instead of sifting through a bunch of bank statements to find the transactions you need to account for, you’ll have all business-related income and expenses gathered in one place.

Apply for a Countingup business account for free.

Another new business owner tax tip to make things easier is to track all your expenses and categorise them. This way, you can easily find the transactions when you need them. 

Even small expenses can quickly mount up when running a business, meaning you risk running out of money if you don’t stay on top of things. 

So make a habit of logging every expense as it happens. It’ll save you from spending hours doing it later on. 

This process will be super easy with the right accounting tool. 

Countingup, for example, automatically labels your expenses into HMRC-approved categories. The app also has a receipt capturing tool so you can scan paper receipts into the system through your phone camera. 

You also get:

• Ongoing cash flow insights 
• Year-round tax estimates 
• Unlimited invoicing on the go 

Save yourself hours of accounting admin so you can focus on growing your business. 

Start your 3-month free trial today. 

Self-employed business owners can claim tax relief on most of their expenses and deduct them from their profits instead. So make sure you claim for as much as you can!

Claiming expenses helps you maintain a healthy cash flow, which is especially useful in the beginning when money might be scarce. 

Common tax-deductible business expenses include:

• Bank fees and interest
• Rent
• Utilities
• Insurance
• Company car
• Equipment or equipment rental
• Software
• Supplies
• Membership fees
• Meals
• Travel
• Subscriptions
• Advertising
• Legal fees
• Maintenance and repair

Even if you’re working from home, you can also claim tax relief on things like:

• Home office space (as long as it’s your main place of business)
• Mortgage interest
• Security system
• Property taxes
• Maintenance, repairs or upkeep
• Business phone line (separate from the home line)
• Insurance

Another tax tip for new business owners is to leverage modern technology as much as possible. 

Accounting software is an unbeatable way to simplify your tax process. That’s because it allows you to keep track of your incoming and outgoing payments, estimate and plan your taxes, and keep track of cash flow. 

In addition, Making Tax Digital (MTD) should come into full force in 2024. When this happens, you must start using technology that supports this system. 

Read our guide to learn more about Making Tax Digital.

We just entered a new tax year (2022/23) on 6 April, which will last until 5 April 2023 (tax years in the UK are 6 April – 5 April). 

You must send your Self Assessment for this tax year and any money you owe to HMRC by the deadline.

Here are the deadlines to keep track of:

First, you must register for Self Assessment if you’re self-employed or a sole trader by 5 October 2022.

You’ll then need to submit your tax return by the following dates:

• Paper tax returns: Midnight 31 October 2022
• Online tax returns: Midnight 31 January 2023
• Pay the tax you owe: Midnight 31 January 2023

If you make advance payments toward your tax bill (known as ‘payments on account’), there’s usually a second payment deadline on 31 July.

If you don’t, you’ll need to pay a penalty, which just isn’t fun. While you can appeal the penalty if you can find a reasonable excuse, it’s best to just pay your bill on time when you can. 

Learn more about what happens if you miss your deadline in our guide called what to do if you missed the Self Assessment deadline. (This guide covers the 2021/22 tax year, meaning things might be different next year.)

Managing your taxes effectively is challenging if you’re not familiar with the common terms involved. 

Knowing business finance words and phrases will make it much easier to keep accurate records, negotiate with investors, and understand your taxes. 

Here are some examples of terms to know:

• Accounts payable –– money your business owes others
• Accounts receivable –– money others owe your business
• Balance sheet –– a double-sided report businesses use to calculate its financial performance
• Cash flow –– money flowing in and out of your business
• Dividend –– a sum of your profits you pay to shareholders in your business
• Equity –– a report used to check your financial health
• Limited liability –– a business structure that reduces the owner’s financial risk
• Net profit –– money you have leftover after paying all your expenses
• Revenue –– money you make from selling your products or services

You can learn more about these terms (and more) in our finance business dictionary guide. 

Our final new business owner tax tip is to consider hiring an accountant to help with your taxes.

During tax season, you’ll rely on lots of reports, transactions and other paperwork to come together and create an accurate tax bill. An accountant can help make sure the numbers are correct and help you fill out your tax return. 

While systems like Countingup make it much easier, an accountant can help you with organisation and offer advice to help you stay on top of this part of your business. 

Plus, with Countingup, you can share your data with your accountant without delays, inaccuracies or lags. It’s simple, seamless, and safe.

Paying taxes may feel tedious and overwhelming, but every business has to do it. But by following the tips outlined in this guide, you can make your tax management much easier and more efficient. 

Just remember to:

• Keep your business finances separate
• Track every business expense to stay organised
• File your Self Assessment before the deadline
• Hand the task to a professional if it’s too complicated

If you want more information to help you manage the financial side of your business more effectively, check out these guides next:

• Capital gains tax tips to reduce your bill
• Best accounting books for small businesses
• When to hire an accountant for taxes