The new UK tax year has begun, and if you’re concerned about the limited time you’ve had to get your financial plans in place for the next twelve months, we’d like to settle your mind a little.
You’re not alone. The end of the tax year is a busy time for social enterprises, and there’s absolutely no harm in taking a step back at the start of the new period in order to plan ahead.
With that in mind, we thought we’d put together a few tips that will help social enterprises get into shape financially and make the most of the next twelve months.
Get ready for digital tax
The government has devised an ambitious plan to digitise tax for UK businesses by the year 2020. Dubbed ‘Making Tax Digital’ (MTD), the scheme will force most self-employed people to swap a yearly tax return for real-time updates.
Although legislation is still being drafted, the real-time updates are expected to take place four times a year and will be processed via compatible tax software.
If you’re running your social enterprise as a sole trader, it’s important to start thinking about how you might deal with digital tax. A great start would be to invest in accounting software which plans to introduce MTD functionality, but we also advise speaking to your accountant for the full low-down.
Get your social enterprise inspection-ready
Social enterprises are no different to traditional businesses in that they need to ensure tidy, up-to-date bookkeeping.
It won’t be the most exciting element of your job and may feel like it detracts from the raison d’être of your enterprise, but by keeping good financial records, you’ll be ready if HMRC decides to conduct an inspection.
Again, investing in modern accounting software will help you immeasurably, and with most offering affordable monthly payment plans, there’s little excuse not to.
Do you need to register for VAT?
From 1st April 2017, the VAT registration threshold increased from £83,000 to £85,000. Therefore, if your social enterprise makes sales of £85,000 or more, you’ll need to register for VAT.
Similarly, the de-registration threshold has also increased from £81,000 to £83,000, meaning that if your social enterprise is currently VAT registered, it cannot de-register until the sales total £83,000 or less.
Double check your eligibility for VAT – it’s a surprisingly easy thing to forget if you’re in the growth stage of a social enterprise.
Promise that you’ll manage expenses better
Managing expenses is another uninspiring job, but one that will benefit you significantly come end of year time.
Your social enterprise will probably be amassing quite a few expenses as it goes about its daily business, and it’s vital you track them sufficiently. Travel costs, entertainment bills and miscellaneous office purchases quickly add up, so promise yourself that every single receipt will be retained and logged correctly.
Check your eligibility for the Employment Allowance
If you’re not familiar with the Employment Allowance, it simply refers to a reduction in the National Insurance bill for certain businesses and charities. Since 6th April 2016, the allowance has increased from £2,000 to £3,000. What’s more, limited companies who only have one director and no other staff are no longer eligible.
We recommend checking the government’s website for full details on Employment Allowance, but in essence, if your social enterprise was eligible for it previously, its status may have changed.
We’ve not covered every nook and cranny of a new financial year above, but the points we’ve touched on will set your social enterprise up for twelve months that are far less likely to be disturbed by unwanted financial surprises.