Tax Season: 25% Of SMEs Hold Off Filing Tax Return

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5 December 2023 – Tax season is upon us, with the deadline for SME’s and sole traders to submit their Self Assessment tax return for the tax year 2022/23 looming. Yet 25% of SMEs are holding off filing their tax return until the last minute.

Every year, when the festive season is approaching, many small business owners and sole traders experience high stress levels. Because it also means that the deadline to file their Self Assessment tax return is almost here.

Even though they have 10 months notice, many SME owners and sole traders are putting it off until the last minute. With a quarter of them saying they leave it to the last month, according to research by accounting software Inuit QuickBooks.

So instead of enjoying the festive season, many small business owners and sole traders have to be content with tax season and the stress that comes with it.

Majority Of UK Business Owners Delay Filing Their Tax Return

The deadline to file the Self Assessment tax return for businesses and sole traders is on 31 January 2024. This means this is a busy time for many SMEs and sole traders.

QuickBooks’ study has looked into the impact this stressful time of year has on them and how it affects their business. Rather surprisingly, only 25% of sole traders and small businesses in the UK file their Self Assessment tax return early, within the first month.

The vast majority take their time, with 46% leaving it until two to three months before the deadline. A quarter even put off filing their tax return until the last month. And 22% of the millions of small businesses and sole traders have filed it too late and incurred hefty penalties from HMRC.

QuickBooks’ researched estimates that small and micro-businesses paid around £114m in late fines as a result.

The study also revealed that more than 13% of small business owners and sole traders had to dedicate time to the Self Assessment on Christmas Eve, Christmas day, Boxing Day, New Year’s Eve and New Year’s Day. Having to swap the festive season for tax season is the last thing any small business owner or sole trader wants.

30% of the survey respondents would rather do some last minute shopping on Christmas Eve then file their tax return. 29% would prefer to travel home during peak Christmas rush. A quarter of sole traders and small business owners would rather listen to Mariah Carey on loop.

Working on the Self Assessment tax return is such a hated task that 21% would even prefer to spend their time with in-laws instead.

Tax Season Also Impacts On Business

59% of small businesses and sole traders have reported that the few months before the deadline are impacting on their business. With 19% saying that it has taken up so much time that they had to cut staff hours because they didn’t have time to train them.

Another 19% have said they had to turn away customers, losing out on business. Especially in the run-up to Christmas, when many people are willing to spend money for presents, this can be very detrimental to a small business.

But it’s not just the time it takes up. 55% of small business owners and sole traders are also losing their motivation and passion for their business as the deadline looms.

What this study has made clear is that many small business owners and sole traders struggle with filing their Self Assessment tax return. 73% said they would need to understand how to prepare their documentation in bite-sized chunks to be able to file their tax return earlier.

76% said it would help them if they had an easy-to-use tool to track details in an app.

Our Opinion

What this study has made very clear is that tax season is a very stressful time for many small businesses and sole traders. But it doesn’t have to be.

Here at Business4Beginners we start working on our Self-Assessment tax return as early as April or May. And to make it a quick and easy job, we keep our books up-to-date all year round.

We use a bookkeeping software, from FreeAgent, which allows us to keep our books in order and ready to file our tax return once filing opens.

Rather than leaving it all until the last minute, we work on our books on a weekly basis. Checking transactions in our handy tool, explaining them and attaching relevant invoices to any incoming outgoing transactions.

This way, we don’t have to spend hours and hours when the deadline approaches. We know that filing tax returns is tiresome, but it’s a necessary evil. The fines for filing late or paying late can be quite hefty and most small businesses and sole traders can ill afford them.

Starting early is key to getting your Self Assessment tax return done without stress and leaves small business owners and sole traders to cash in during the festive season.

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The Business4Beginners news team consists of several writers who each have their own unique experience in businesses. By keeping their fingers on the pulse, they bring you the latest in news and trends impacting small UK businesses.
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