Managing finances effectively is critical for the success of any business, particularly in the landscape and trade industries. These sectors often face unique financial challenges, from managing fluctuating cash flow to compliance with tax regulations. Understanding the UK’s tax requirements is key to ensuring a business runs smoothly and avoids costly penalties.
Here’s a straightforward guide to help navigate UK tax requirements:
1. Registering a Business
It is a legal requirement for sole traders, limited companies, and those in a partnership to register their business with HM Revenue & Customs (HMRC) to comply with UK tax laws. Sole traders must register for self-assessment to report income and expenses, limited companies must register with Companies House and submit annual accounts and corporation tax returns, and partnerships require each partner to register for self-assessment individually.
2. Key Taxes
Understanding which taxes apply to a business is crucial. Here are the most common taxes landscape and trade businesses encounter:
Income Tax – sole traders pay income tax on profits after deducting allowable expenses. Keep detailed records of income and expenses to ensure accurate reporting.
Corporation Tax – Owners of a limited company will pay corporation tax on profits, and this must be reported to HMRC within nine months and one day of a company’s financial year-end.
VAT (Value Added Tax) – If annual turnover exceeds £85,000 (the current threshold), businesses must register for VAT. Many businesses in the trades benefit from the Flat Rate Scheme, which simplifies VAT reporting.
CIS (Construction Industry Scheme) – Many landscape and trade businesses fall under CIS. Contractors must deduct CIS tax from subcontractors and submit monthly returns. Subcontractors must ensure CIS deductions are recorded properly, as they can be offset against the tax bill.
National Insurance Contributions (NICs) – Employers and employees must pay NICs. Sole traders pay Class 2 and Class 4 NICs, depending on profits.
3. Keeping Accurate Records
Maintaining good financial records is essential for effective tax management, including:
- Receipts for expenses, such as materials, fuel, and tools.
- Invoices issued and received.
- Payroll records for those businesses with employees.
- Bank statements and any other documentation showing income or expenditure. Using accounting software such as Xero can make this process easier.
4. Tax Relief and Allowances
Take advantage of tax reliefs to reduce the tax burden and improve cash flow:
- Annual Investment Allowance (AIA): Claim up to £1 million annually on equipment or machinery purchases.
- Mileage Allowance: Mileage at HMRC’s approved rates can be claimed if personal vehicles are used for business purposes.
- Employers Allowance: Up to £5,000 per year can be claimed to offset National Insurance Contributions for businesses with employees. This allowance is particularly beneficial for small businesses looking to manage employment costs.
5. Meeting Deadlines
Missing tax deadlines can result in costly penalties and interest charges, making it essential to stay on top of key dates. For individuals, self-assessment tax returns are due by 31 January each year for online submissions. Businesses must ensure corporation tax payments are made nine months and one day after the end of their financial year, while VAT returns are typically submitted quarterly. Additionally, CIS returns must be submitted by the 19th of each month.
6. Seeking Professional Help
Tax rules can be complex, and mistakes can be costly, but with the right systems and support in place, it becomes much more manageable. By staying organised, meeting deadlines, and leveraging expert advice, businesses can remain compliant and position themselves for long-term success.
Partnering with a knowledgeable accountant who understands the landscape and trade industries can help ensure businesses stay compliant and maximise tax efficiencies. At Sones Accountancy Services, we specialise in helping business owners in these sectors ‘know their numbers’ and take control of their finances. Support is provided for everything from bookkeeping and payroll to tax planning and compliance, enabling business owners to concentrate on growing their businesses. For assistance with navigating business finances, contact Sones Accountancy Services today for personalised advice.
