HM Revenue & Customs (HMRC) will automatically add a penalty to your tax bill equal to five per cent of the Self-Assessment tax you owe for 2021/22 which is unpaid after midnight on 2 March 2023. So urgent action is needed.

The deadline for sending most online 2021/22 Self-Assessment returns to HMRC, and for paying the related tax, was 31 January 2023.

More time

Due to the coronavirus pandemic, HMRC had previously allowed taxpayers more time to file their tax returns and pay the tax before charging penalties.

There was no such relaxation this year and taxpayers should have filed their returns for 2021/22 tax return online and paid what was owed by the end of January.

Taxpayers who had not settled their unpaid tax by that date have started to accrue late payment interest. Taxpayers who have difficulty paying the tax due may be able to arrange a payment plan online.

Interest charges

Individuals who want to make regular monthly or weekly payments towards their tax bills are also able to set up a budget payment plan with HMRC online. Late payment interest will continue to apply to the balance that remains outstanding.

For returns that remain unsubmitted, daily penalties will kick in if a return has not been filed online by 1 May 2023.

According to HMRC figures, more than 11.7 million taxpayers filed their tax returns before the 31 January 2023 deadline, but 600,000 taxpayers still missed the deadline.

HMRC was expecting around 12.1 million tax returns to be filed for the 2021/22 tax year. Of these expected returns, 11.4 million were submitted on time, along with 0.3 million unsolicited returns and late registrations.

Need advice with Self-Assessment and related tax matters? Contact us today.

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In both cases could be time to step back and reflect on where you are, develop what has worked and abandon methods that don’t.

It is time to plan out a strategy for the long term. It could be a one-year or five-year plan that considers:

• Where the company is heading
• What you hope to achieve
• The challenges you anticipate along the way
• What investment will be necessary
• The people, technology and skills required to achieve your goals.

Within this plan, you will need to consider commercial guidance and tailored business planning, including funding, financial management, advice on succession planning, your business structure and strategy and of course financial reporting.

You make take pride in how you run your business, but it makes sense to enlist professional support. That advice can save you money and help plan for future growth.

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To get the most out of these figures, many companies also produce management accounts – an in-depth analysis of the data. Management accounts aren’t mandatory – and there’s no fixed way to do them. But they’re invaluable.

For small business owners, book-keeping and accounting falls under the category of ‘necessary evil’. It’s a job that has to be done (or most likely outsourced) to meet your obligations.

Management accounts are a set of financial statements prepared either monthly or quarterly, which provide clear insight into the financial trading position of your business.

They aren’t required by law, and they don’t have to be filed with HMRC – but they’ll put you more in control of your finances than ever before, supporting the growth of your business.

Management accounts for small businesses typically include a profit and loss account, balance sheet, cash flow statement and a short report. You can put the accounts together yourself, or more realistically, an accountant can do it for you.

If you’re using a cloud accounting package like Xero, it’s easy to supply the necessary information to your accountant so they can produce the management accounts on your behalf.

Management accounts can:

• Monitor growth: You can compare your management accounts monthly, quarterly or yearly to accurately monitor not just your financial growth, but your performance as well.
• Plan for the future: You can more accurately forecast your future revenue, or make allowances for doubtful accounts. You might even spot seasonal differences in cash flow, so that you can plan around slower months in future.
• Motivate for funding: You can approach investors confidently, ready to answer all their questions about your business performance – whereas failing to show any will usually result in a swift ‘goodbye’.
• Optimise processes: If clients take a while to pay, you can improve your collection process, or make other credit decisions quickly. If you know which customers pay regularly, you can develop loyalty programmes and attractive offers to reward them.

Management accounts help you spot cash-flow problems before they happen, and help you analyse the money going out of your business. Could you cut your outgoings? Are you getting good value from your suppliers? Total business costs are of little value when managing a business – you need to know how and where that money is being spent.

With up-to-date information available each month, you can plan tax and dividend transactions with greater confidence. Management accounts for small businesses can help maximise the potential benefits of paying dividends rather than salary.

In addition, a regular review of your business finances means there’s no place to hide for malpractice.
Having regular management accounts produced reduces the amount of work required at year end normally reducing the cost of producing your annual accounts.

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