New Tax Year Resolutions for Your Small Business in 2022
New year’s resolutions don’t just have to be personal. The start of the new tax year is the perfect opportunity to take stock of your business and make new goals for the months ahead. Below, we give you an overview of what to focus on when planning for the new tax year.
It’s the start of another tax year, and maybe your business finances are not looking as healthy as you expected. Or perhaps you have seen some growth in the past year and you want to capitalise on it in the next few months.
The beginning of the financial year is the perfect time to take stock of your business’s finances and set yourself some resolutions for the coming year. Below, we set out a few actions you can take to get your finances in fine fettle this new tax year.
Make a budget – and stick to it
It’s worth creating a budget for your small business to help you make decisions about what you can and can’t afford. You can see your expenses and income in one place, and think about where you might want to make adjustments.
If you already have a business budget in place, the new tax year is a great time to review it. Ask yourself whether you’ve been able to stick to your budget. Have there been any changes to your business that may affect your finances? Keeping a close eye on your budget allows you to monitor and adapt as necessary.
With your budget to hand, you should be well informed to plan your next business moves.
Create a cash flow forecast
If you don’t already have a cash flow forecast, now might be the perfect time to draw one up.
A cash flow forecast can help you see what’s coming in and going out of your business on a weekly, monthly, quarterly or yearly basis. With it, you can work out whether you’re likely to make a profit or a loss, and plan accordingly.
If you find you consistently have more money coming in than going out, you may decide that this year you’re in a comfortable position to plan to grow your business.
On the other hand, your cash flow forecast may act as a warning bell. If it shows you may spend more than you bring in, you may need to consider readjusting your expenditure.
Either way, estimating your cash flow can help you plan for the upcoming tax year.
Consider switching providers
A review of your business’s income and expenditure can throw up some areas where you feel that you’re spending too much. You may be looking for ways for your business to make savings if you’re losing money or you want to increase your profit.
You may be able to cut back on spending by changing providers – for example, switching your business bank account or renegotiating contracts with your suppliers.
Business bank accounts
The new tax year is a good excuse to check the deal you’re getting on your business bank account.
You may find that it no longer fits the needs of your business or that there is another account that offers a cheaper service. You may be able to save money by switching your account to another provider.
You may be able to switch your business bank account using the Current Account Switch Service. To do this, the following criteria apply:
- You must run a small business, charity or trust.
- You must have fewer than 50 employees.
- You must have an annual turnover lower than £6.5 million.
- Both your current bank and your new bank must be signed up to the scheme.
You can still switch if you don’t meet these criteria, but you may have to arrange a switch directly with your new bank or open a new account and transfer your payments over manually.
If you’re a sole trader, you may not have a business bank account, but this year could be the year to open one. Having a separate bank account can help keep your business finances organised.
If you’ve noticed that you’re paying a lot for your gas or electricity, you may want to consider switching to a different business energy provider.
You should be able to switch if:
- you’re on a ‘deemed’ tariff – for example, if you’ve just moved into a new building and you haven’t agreed a new contract yet
- your business energy contract has just ended – though you should check to see if you need to give notice before switching
You may also be able to negotiate a better deal with your existing supplier even if you’re not permitted to switch providers.
And if you can’t switch right now, it’s worth marking your contract end date in your calendar so you remember to compare deals as soon as possible.
You may want to compare quotes from different insurers to see if you could save on your business insurance premium.
It’s also worth checking any policies you have taken out to make sure they still apply to your business. If you’re paying for a policy you no longer need, cancelling it could save your business money.
You should check the terms and conditions of any new insurance policy to make sure you maintain a suitable level of cover for your business. This is particularly important when it comes to policies such as professional indemnity insurance, as you may need to agree with your insurer that previous work can be retroactively covered under a new policy.
For example, if a client made a negligence claim against you for work you completed before you took out a professional indemnity policy, your insurer probably wouldn’t pay out – even if you did have insurance in place at the time of the claim. To ensure you were covered, you would need to agree a retroactive start date with your insurer to be covered for claims that pre-date your new policy.
» MORE: Do I need business insurance?
If you’re looking to cut back on your spending, then it may be a good time to reassess your supply chain.
You may be able to find new suppliers that offer the goods and services your business needs at a better rate than you’re currently paying. Or you may want to try to negotiate with your current suppliers to secure a better deal.
Check your business credit score
If you’re looking to expand in the coming year, you may consider taking out a business loan or using a business credit card to finance your growth.
When you apply for a business loan, lenders may check both your personal and business credit score. Having a good credit score may mean that lenders offer you better terms on business loans and credit cards.
It’s worth checking your rating before applying for a credit product to see whether you could improve your credit score. For example, registering to vote is a simple task that could help your personal credit score. Check that all the details on your file are correct too – any errors could hamper your chances of being accepted.
» MORE: How do business loans work?
Reassess your business structure
If you’re a sole trader but your business has grown recently, you may be considering restructuring your business into a limited company.
Limited company status can make your business more attractive to consumers and could allow you to bring more directors on board with specific expertise – for example, if you want to expand in the future or have plans to onboard new talent.
Becoming a limited company also makes your business a legal entity in its own right, so you would need to use a business bank account to separate your business and personal finances if you weren’t already doing so. You would also need to register your company name with Companies House, so your business can be officially incorporated.
That said, you should think about how your tax obligations would change. Limited companies are liable to pay Corporation Tax on their profits.
Becoming a limited company is a big decision. It’s worth seeking independent financial advice before restructuring your business.
File last year's tax return
If you’re a sole trader registered to pay your tax via self-assessment, then you need to file a tax return with HM Revenue & Customs (HMRC) each year and pay any tax that is due.
You have until midnight on 31 January in the following tax year to file online and pay the tax you owe. If you want to submit a paper tax return, you must file by midnight on 31 October.
If you run a limited company, the process is different. You must send a Company Tax Return and pay Corporation Tax.
The deadline for filing a Company Tax Return is 12 months after the end of the accounting period it covers. You must pay any Corporation Tax owed no later than nine months and one day after the end of this accounting period.
Whether you’re a sole trader or run a limited company, there is no reason you can’t file your return earlier. Submitting your return earlier means you’re on top of your tax obligations. You’ll know how much tax you have to pay and can budget around it. It also means you won’t face any penalties or interest for filing or paying late.
» MORE: End of tax year checklist
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Kristina is a writer at NerdWallet. A recent graduate trading French for finance, she has experience creating content for student newspaper Cherwell and an edtech company. Read more