Running a business comes with plenty of responsibilities – and tax is one area where mistakes can prove costly. As an accountancy firm working with businesses, sole traders and partnerships, we’ve seen how common tax errors can lead to penalties, cash flow issues, or missed savings. Here are five of the most frequent mistakes – and how to avoid them.
- Mixing Business and Personal Finances
It might seem convenient to use one bank account for everything, especially when starting out. But mixing personal and business transactions makes bookkeeping harder and increases the risk of errors.
Avoid it: Open a separate business bank account and use it exclusively for your business income and expenses. It’ll make tax time and submitting your records far smoother.
- Missing Allowable Deductions
Many small business owners overlook what they can claim as expenses – from home office costs to travel, software, and even part of their phone bill. This means paying more tax than necessary.
Avoid it: Keep detailed records of your expenses and speak to an accountant to ensure you’re claiming everything you’re entitled to.
- Not Saving for Tax
It’s easy to forget that not all the money coming into your business is yours to spend. Without setting money aside, you could be caught short when your tax bill arrives.
Avoid it: Set aside a percentage of your income each month for tax. A good rule of thumb is 25–30%, depending on your profits.
- Filing Late or Inaccurately
Missing the Self Assessment deadline or submitting incorrect figures can lead to HMRC penalties – even if it was an honest mistake.
Avoid it: Stay organised throughout the year and work with an accountant to file on time and accurately. This will become all the more relevant over the next two years when making tax digital for income tax is introduced.
- Overlooking VAT Registration Thresholds
If your business turnover exceeds the VAT threshold (£90,000 as of 2024/25), you must register for VAT. Many small businesses miss this, especially during periods of rapid growth.
Avoid it: Regularly review your 12-month rolling turnover, not just your financial year, to ensure compliance.
Need Help Staying on Track?
If you’re unsure whether you’re getting everything right, we’re here to help. At Elevate Accountancy, we pride ourselves in the support we are already giving to many small businesses, sole traders, and partnerships with tax planning and compliance – so you can focus on growing your business with confidence – something we can also help you with. If you are not already using us why not get in touch via our website or by calling 01978 803000.