Ah, year-end checks for small businesses – that time of year when we all scramble to make sure everything is in our accounts for the year and we’re not going to get hit with any unexpected tax bills from HMRC. It can be a bit daunting but fear not, I’m here to guide you through in an easy-to-understand way, tailored to small businesses and solopreneurs.
What do year-end checks involve for small businesses?
First things first, let’s talk about what year-end checks for solopreneurs and small businesses actually involve. Essentially, they’re a review of your finances to make sure you are going to be paying the right amount of tax and national insurance contributions (NICs) for the year. It’s making sure that all your income, expenses and bank instances match up. It’s a bit like balancing the books, and if you’ve been completing daily, weekly and monthly checks, this will all be easy!
The good news is, you don’t have to do this all on your own. There are plenty of tools and resources available to help you out. For example, you can use HMRC’s online tax calculator to get an estimate of your tax bill or use accounting software to keep track of your income and expenses throughout the year. If you’ve been following me for a while, you’ll know I advocate frequent checks, and this is why.
5 steps to year-end checks
Let’s get into some of the specifics with a nice, easy-to-follow checklist for completing your small business year-end checks:
1. Your Income
This might seem like an obvious one, but it’s important to make sure you’ve recorded all your income for the year. Any sales, or money into the business needs to be recorded in your bookkeeping. Be that in the software you use, in a ledger or in a spreadsheet. When it comes to your tax return you will also need to have details of any wages, other self-employment income, pensions, rental income, or investment income you’ve received. These don’t need to be included in your business bookkeeping (obviously!) but it can be useful to keep them all in a file/somewhere easy to find for tax return time.
2. Your Expenses
Similarly, you’ll want to make sure you’ve claimed all the expenses you’re entitled to, and that, once again, these are seen in your bookkeeping records. This could include things like travel expenses, office equipment, materials, insurance, work-from-home expenses or professional development courses (not an exhaustive list!). You should have kept receipts and invoices for these two, either in folders on your desktop or as images in your accounting software. You will not need to add them to tax returns, but you do need to keep them.
3. Check You’ve Claimed All Your Expenses
There are a variety of tax relief and allowances (or expenses) that can be claimed to help you reduce your tax bill. Make sure you’ve taken advantage of all the relief and allowances you’re entitled to. Check the HMRC website for allowable expenses if you are unsure.
4. Using Bookkeeping To Plan For Your Business’s Future
By looking at your income and expenses over the past year, you can get a better idea of what you can expect in the year ahead. This can help you plan for things like investments, savings, or budgeting. If you generate (or download from your software) a profit and loss balance sheet for the year, you can easily identify areas of the business that are doing well. And areas where you could explore saving or making changes. A great way to look at your business needs.
5. Check Your Tax Predictions
Let’s face it – taxes aren’t the most exciting topic in the world. But by taking the time to do your year-end checks, you can ensure that you’re not paying more than you need to and that you’ve got a good idea of your tax and NI bills so that you can make savings if needed before the tax deadline on January 31st. The benefit of doing this earlier in the financial year gives you breathing room and allows you to plan for costs ahead.
Why are year-end checks important for small businesses and solopreneurs?
Of course, this is just a general overview of what you should be checking – there may be other things specific to your situation that you need to consider. If you need further advice for your specific circumstances then book a free call and we can talk it through.
Approaching your bookkeeping with a smile and reviewing things regularly, means that it doesn’t have to be a chore. You might even surprise yourself and find it somewhat enjoyable!
In summary, completing your year-end checks is a vital part of managing your finances for your small business, and it doesn’t have to be a scary or daunting task. Just remember to check your income, and expenses, and seek advice if you need it. And maybe following my advice of frequent reviews might mean that next year you even find yourself looking forward to it!
