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How to get your small business ready for a great tax year

Written by: Mettle editorial
5 min read

It’s always best to be prepared when it comes to your taxes. Vicki Bracey, Product Owner at Mettle, has put together some handy tips on how you can set your small business up for a great tax year by getting everything in order now.

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New year, new tax! It can be easy to put off your tax return and leave it to the next deadline. But getting your tax in order now, before the new tax year (which starts on 6 April), can make submitting much easier. 

This blog will look at: 

  • How to get your records in order

  • Making Tax Digital (MTD) and VAT

  • Finding time to focus

  • Where to find help

Get your records in order

As the 2021/22 tax year ends, now is the time to get all your records in order for the year. It’s easier to take time to review and check your records are up to date while it’s still fresh in your mind. 

You’ll need to keep a record of any incomings and outgoings for your business. You should also keep a copy of any bank statements and record any payments into or out of the business, whether that’s to you or your employees. And because you need to keep the records for at least five years, we suggest you find a solution that’s easy to access like FreeAgent – this award-winning accounting software is included free of charge with your Mettle account*. 

As a small business, you can also take this time as an opportunity to follow up on any outstanding invoices that haven’t been paid or are overdue.

If the tax year also marks the end of your accounting period and you sell products, you’ll need to organise a stocktake. Make sure you put enough time aside to manually check and record all the inventory that your business currently has on hand.

If you’re using cash basis as a sole trader, you aren’t required to do a stock check, but it’s a good opportunity to check how much you have in stock. 

As a limited company, your accounting period might be different to the tax year. But you should start thinking about your personal tax return and storing any records of salary or dividends you have been paid as a director.  

Tax tips for your side hustle or small business:

Making Tax Digital (MTD) for VAT

Since 2019, businesses with a turnover of over £85k have had to use MTD software to submit their VAT returns. From April 2022, a new stage will be introduced. MTD for VAT will apply to all VAT-registered businesses, regardless of turnover. 

From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

Those with an income of between £30,000 and up to £50,000 will need to do this from April 2027.

The government will not extend MTD for Income Tax Self Assessment (ITSA) to general partnerships in 2025 as previously planned.

There will also be a new penalty system. This will be designed to better align penalties for MTD for Income Tax with MTD for VAT.

Use a separate bank account for your business 

A separate business account can make it much easier at the end of the year to identify the income and expenses specific to your business. Some accounts also allow you to store your receipts and invoices digitally, making it easy to find them when you complete your tax return at the end of the year. 

Find time to focus 

With tax return submissions opening from 6 April, make sure you set time aside to focus and complete your return accurately. It’s less stressful and you are less likely to make mistakes if you have plenty of time! 

Ask for help if you need it

To make sure you don’t pay too much tax, check what allowances you can use and what you can claim as expenses. HMRC has lots of online articles which will help you understand the rules which apply to you and your business. 

If you need more support, you can also get help from an accountant. Finding a good accountant will help avoid mistakes and they may find opportunities for you to save money on your tax return.

Updated 6 February 2023
Disclaimer: The content of this blog is based on our understanding of the topic at the time of publication and should not be taken as professional advice. Any of the information may be subject to change. You are responsible for complying with tax law and if in doubt, should seek independent advice.

*To get FreeAgent for free, all you have to do is make at least one transaction a month from your Mettle account. If you don’t make one transaction a month, or if your Mettle account is closed and you continue to use FreeAgent then the FreeAgent fees will apply.

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At Mettle, our aim is to give everyone the financial confidence to work for themselves, and that’s no different with our content. We want to give small business owners, freelancers and sole traders the tips, tricks and industry updates they need to run their businesses. 

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