Just finished your tax return? Time to start preparing next year’s! Plus, much more of the latest business tax news
You may just be recovering from completing your latest tax return, but now really is the time to start planning for next year’s! We give you some guidance on how to feel more prepared for next year. Plus, is cash still king? And a deposit return scheme for drinks containers in England and Northern Ireland. Read on to find out more….
Avoiding the last-minute rush: A guide for business owners on preparing next year’s tax return
The annual self-assessment tax return deadline has just passed, and for many business owners, the experience may have been a mad scramble to gather documents, double-check figures, and submit their returns and pay the tax on time.
If that was your situation, you were in good company! HM Revenue and Customs said that 3.4 million taxpayers, almost a third, hadn’t submitted their tax return yet going into the final week before the deadline.
The stress of last-minute filing may have made you determined to get it all done earlier this year. The good news is that with proactive planning, next year’s tax return can be a much smoother process.
Here are some practical steps you can take now to avoid a last-minute rush and enjoy a more relaxed 2025.
1. Review and reflect on this year’s process
Start by evaluating what worked well and what didn’t during this year’s filing. Did you struggle to locate receipts or invoices? Were you unclear about certain tax rules? Taking stock of these challenges now allows you to address them early. Make a list of improvements to implement, such as better record-keeping or seeking professional advice.
2. Organise financial records regularly
Committing to updating your financial records on a regular basis can really help to eliminate last-minute stress. This could involve:
- Digitising receipts and invoices: There are apps and software you can use to scan and store receipts as they come in. Many programs will even categorise expenses automatically, saving you time later.
- Reconciling accounts monthly: Regular reconciliation ensures that your bank statements and your financial records match up. This can really help you to avoid missing something out.
- Maintaining a tax file: You could create a dedicated file (digital or physical) to store documents like business expenses, income records, and correspondence with HMRC. That way everything can easily be found when you need it.
3. Use accounting software
Investing in reliable accounting software can simplify your tax preparation work significantly. Many modern tools will integrate directly with your bank accounts and track your income and expenses. Popular options include Xero, Sage and QuickBooks.
4. Understand tax allowances and deductions
Tax rules can change annually, so it helps to stay informed and up to date. Try to familiarise yourself with the allowable expenses, reliefs, and deductions that are relevant to your business. For example, you may be able to claim for home office expenses, equipment, or professional services.
5. Set up a tax savings account
Noone likes paying tax at the best of times, but a large, unexpected bill can cause a lot of financial strain. To avoid that, you could set aside money regularly for your tax. For instance, you could open a dedicated savings account and deposit a percentage of the income received each month.
6. Plan ahead with a tax calendar
Many find it useful to create a tax calendar that highlights the key dates and deadlines that apply to them. Setting reminders well in advance can help to give you more time to prepare and avoid penalties.
These proactive measures can help you turn filing your tax return from a stressful ordeal into a manageable task. By starting early, staying organised, and making good use of technology you’ll save time, reduce stress and allow yourself to focus on growing your business.
If you would like any personalised advice on how to keep your tax records or advice and training on using accounting software, please give us a call and we would be happy to help you!
Is cash still king?
The new economic secretary to the Treasury, Emma Reynolds, has said that there are no plans to regulate businesses, whether big or small, to compel them to accept cash.
Concern has been raised about various shops and service firms not accepting cash and therefore excluding those who rely on cash to pay for things. While some countries appear to be planning to put rules in place that require essential services to accept cash, the UK does not seem as though it will be following suit.
Cards have been used for many years in the UK, with mobile payments by smartphone now becoming increasingly popular. 72% of 16-24 year olds now regularly use mobile payment services. This increase is reflected across all age groups, with 27% of those aged 45-54 now also regularly using this method.
However, cash still remains a popular choice for making payments. Cash was used in a fifth of shop transactions last year. After decades where use of cash has been shrinking, this is the second year in a row where cash use in shops has increased. It seems that many find that using cash helps them to budget better.
Should you accept cash?
The answer to this question really depends on who your customers are. If your customers are largely older or more value conscious, then it seems that these types of customers are more likely to rely on paying with cash. If you don’t accept cash, you may risk losing sales.
On the other hand, if you mainly sell to younger, more digital savvy customers, not accepting cash may have little effect on sales. This may help you save the costs and security issues involved in handling cash.
See: https://www.bbc.co.uk/news/articles/c20gevkx8gyo
Data Protection Day at the ICO: Focus on AI
28 January 2025 was Data Protection Day and the Information Commissioner’s Office (ICO) used it to highlight the opportunities and challenges related to AI and data protection.
AI adoption is integral to the government’s growth plans, however the ICO are keen to make sure that the opportunities AI brings are taken up in a way that keeps people safe.
The ICO have highlighted some misconceptions about AI, and this contains some good pointers for businesses and organisations considering using AI.
Control over personal data
There is no change to the rights that people have over their personal data. Each person has the right to object to their own personal data being used for AI purposes. The ICO are also stepping in on this issue – as they did recently with LinkedIn and Meta – when they observe incorrect approaches by organisations.
Be transparent
The ICO emphasised that being open and honest with people isn’t optional or an afterthought. Businesses that want to use people’s data to train AI models need to be transparent about what they are doing. The ICO recently consulted on this and found a lack of transparency across the industry, but feel this matter is central to firms building trust in their AI models.
Intention is irrelevant
While an organisation may not mean to process people’s data, intention is irrelevant. It is what happens to the data that matters. This means businesses must be careful about the data they use to train AI models.
AI models have data protection risks
Some have argued that AI models don’t store personal data and so data protection doesn’t apply. However, some AI models can contain the personal data they have been trained on in a form that allows for people to be identified. The ICO have said they are continuing to improve their understanding of this area.
Data protection and AI go hand in hand
Again, some have argued that data protection law should be lighter touch when it comes to developing AI. However, the ICO are clear that businesses must first consider how they will make sure people’s rights and freedoms are protected before using AI in their products and services.
Considering the overall message from the ICO, it seems clear that businesses involved in training AI models or using AI in their products and services need to be careful that they are complying with data protection laws.
Reforms to pensions proposed in order to drive growth
The Prime Minister and Chancellor met with business leaders last week and unveiled proposals to give occupational defined pension schemes more flexibility.
Restrictions will be lifted on how well-funded, occupational defined benefit pension funds that are performing well will be able to invest their surplus funds. It is hoped that this will pave the way for future growth across the economy.
Currently, around 75% of such pension schemes are in surplus amounting to £160 billion. However, restrictions have meant that businesses have found it difficult to invest these funds, even when both trustees and sponsors want to do so.
The proposals will allow trustees, if they agree, to share a portion of the scheme surplus with a sponsoring employer. The employer can then choose to invest the funds in its core business and/or provide additional benefits to members of the pension scheme.
Jonathan Lipkin, Director of Policy, Strategy & Innovation at the Investment Association said: “With the right guardrails in place, the government’s proposals could help channel more funding into the economy, by enabling schemes to invest more widely and take on greater risk, while allowing for members to receive an uplift to pension benefits.”
Deposit return scheme to launch in October 2027
New legislation for England and Northern Ireland has come into force that will allow for a deposit return scheme for drinks containers in England and Northern Ireland. Scotland is also progressing similar regulations.
A deposit return scheme, which more than 50 countries worldwide are now using, gives people a financial incentive for returning empty bottles and cans to a collection point, such as at a supermarket. According to government supplied statistics, the average return rate in Europe is 90% with Germany leading the way at 98%.
The legislation will allow for the appointment of the Deposit Management Organisation, the scheme administrator, in April 2025. The deposit return scheme will then launch in October 2027.
It is estimated that 30 billion single-use drinks containers are bought each year in England, Scotland and Northern Ireland. The deposit return scheme could provide significant help in ensuring more of these materials are recycled rather than being put to waste.
Businesses will no doubt have opportunity to demonstrate their commitment to the environment as these regulations take effect.