Managing a Large Tax Bill and Preparing for Future Bills.
Sometimes the tax bills can be so large that it’s difficult to manage. For any business, big or small, a large bill can cause a huge amount of stress and worry. Through planning, you can stay ahead of your tax commitments. HMRC support could be available to your business, as well as options from banks and funders to help create a stable cash flow. Let’s review some of the ways you can get support when your tax bill is large (or larger than expected), and how you can plan and put a stop to the same thing from happening year after year.
Make sure you know when your tax deadlines are.
It is essential that you understand your obligations as a business owner, and make sure you are aware of your business tax deadlines and payment dates. Knowing when payments are due is the first step in budgeting and planning ahead of time, so that the necessary funds can be set aside.
Use HMRC support options.
Talking to HMRC about your incomings and outgoings is a wise decision if you’re struggling to make payments. They may be able to help you come up with an agreement that works for both parties. It is important that an arrangement is made as soon as possible, giving businesses the chance to get back on track while minimising any late payment charges or incurring interest fees. Setting up a payment plan with HMRC doesn’t have to be difficult; simply contact them (or, if you prefer, ask your accountant to do so on your behalf) and discuss how to pay your dues in a manageable way.
The UK government provides several options for businesses in need of support with their tax bills. For example, Time To Pay is an agreement between a fundamentally viable business and HMRC which makes it possible to spread out the amount owed over a period of time, provided that all taxes are paid in full before the end of the agreed period. It allows you to spread the cost of your tax bill over several months, so you don’t have to pay it all at once and can manage your payments more easily.
Seek external advice from alternative financial providers or banks.
If you’re struggling to pay your tax bill, it’s worth considering help from banks and alternative financial providers. They can offer advice on ways to borrow money, as well as help you manage your cash flow in the future.
You can approach alternative financial providers yourself directly, or you may prefer to use the services of a professional commercial finance broker to explore the market on your behalf. Banks or alternative funders may offer tax-related support such as extended loan terms or overdrafts, as well as loans specifically designed to help businesses cover the costs of their VAT bills.
Invoice Finance is an option whereby a business sells their invoices at a rate, in order to receive pre-payment, invoice finance can be used as both a sustainable growth tool in the short and long term as well as providing flexibility with spending options, most providers would not be adverse if the funds raised were used to repay existing borrowing or to settle tax liabilities.
A loan is normally offered as a lump sum which is repaid over a period of time and comes with a set interest rate and repayment terms. An overdraft works similarly but allows you to borrow an amount up to an agreed limit, drawing down funds as they are needed and repaying them at regular intervals, however, overdraft fees can be very costly.
Make sure you’re claiming all the business deductions and allowances you’re entitled to.
As a business owner, you’re responsible for claiming all applicable deductions and allowances in order to reduce your liability. This means ensuring that you are aware of all available credits as well as any write-offs or tax exemptions that could potentially reduce the amount of tax you owe. Research available options so that you can take advantage of them and ensure your accountant is aware of all the relevant expenses incurred, whether it’s a home office expense or travel reimbursement etc.
Staying up to date with changes to tax regulations will also help ensure you’re always taking advantage of favourable deductions and allowances. Make sure you review your records annually to make sure none have been overlooked – the savings could be considerable!
Tax Credits.
HMRC also provides tax credits for certain types of businesses, such as those involved in research and development. You can use these credits to reduce your tax bill, providing much-needed relief when you need it most.
Planning for the future.
Once you have made arrangements for paying your current tax bill, it’s then important to make sure that you don’t find yourself in the same situation next year (or in the future). Therefore, you must ensure that your business has a steady cash flow and that you are regularly analysing your business’s financial situation and future liabilities.
Keeping on top of your record-keeping.
Good record-keeping is not a glamorous task, but it provides crucial information regarding financial, operational, and administrative performance as well as help you anticipate future issues. Taking the time to review your records regularly benefits both you and your business in the long run by allowing you to quickly identify problems and take corrective action where necessary.
Proactively reviewing your records also leads to more accurate forecasts of upcoming expenses or changes in cash flow. Setting up regular reviews will help improve process efficiency and provide greater insight into any discrepancies that might arise. In short, keep on top of your record-keeping so that you can get ahead of any potential problems, and enjoy the peace of mind that comes with being prepared!
Future Tax Planning and staying ahead of your tax commitments.
If you think that a large tax bill may be looming, plan ahead as much as possible. Consider working closely with an accountant or tax expert to help you plan more effectively.
Keeping an updated cash flow forecast will help you to plan for upcoming payments and make sure there are enough funds available. It’s also useful to review your finances on a regular basis and identify any areas where costs could be cut. This can be done by analysing past spending and looking for ways to streamline processes.
Maintaining a healthy cash flow with invoice finance.
By entering into an invoice finance agreement, you can start taking steps to ensure that you aren’t in the same position next year with an unhealthy and struggling cash flow. A professional such as an accountant, will be able to assist you with reviewing and analysing your current cash flow. In additional they will offer guidance and advice on how to manage it more effectively.
Invoice finance can provide up to 80% of the value of your invoice, allowing you to access funds within 48 hours (after the initial set-up). This cash injection can be used for a variety of business needs such as paying suppliers, investing in new equipment and technology, or even hiring new staff, or getting up to date with HMRC.
Monitoring your cash flow will help you to identify any issues before they become a challenge, enabling you to overcome them before they are problematic. Invoice finance can also provide regular reports on the performance of your invoices which will help you to assess whether credit terms need adjusting or if additional payment methods should be considered.
With proper planning and guidance, you can always remain in control of your finances and stay ahead of your tax commitments. By maintaining a healthy cash flow, you can make sure that your business has the funds it needs to keep operations running smoothly and meet its financial obligations. Invoice finance is an ideal solution for businesses that need access to additional working capital or require more control over their cash flow. It will provide you with the peace of mind of knowing your finances are stable, allowing you to focus on other areas of running your business.
Invoice finance is available to SMEs, start-ups, and established businesses who are seeking funding up to £1 Million.
