How to Make Tax Time Less Stressful: Saving Throughout the Year
How to Make Tax Time Less Stressful: Saving Throughout the Year
For many sole traders and small business owners, the self assessment tax return deadline is a dreaded period filled with stress, last-minute calculations, and sometimes, unexpected surprises. But it doesn’t have to be this way. With a little forward planning and regular financial habits, you can transform the way you feel about your tax return.
Here’s how you can make tax time less stressful:
Understand Your Tax Obligations
At Valorem Virtual Finance we believe that knowing exactly what you owe is crucial to planning ahead for the deadline. You’ll need to set aside money for both income tax and National Insurance contributions. If you’re earning above the VAT threshold, you’ll also need to account for VAT payments.
We help our clients by giving them an indication of how much money they should be setting aside each month. We also encourage our clients to get the information we need to us as early as possible so that we can get your tax return filed in good time, meaning that you know exactly how much you need to pay and when.
Set Up a Dedicated Tax Savings Account
One of the best ways to ensure you’re financially prepared is by setting up a separate savings account specifically for your tax payments. Each time you get paid from clients, transfer a percentage of your earnings into this account.
Some bank accounts have savings spaces which are ideal for putting money aside for tax, VAT and for a rainy day!
A good rule is to set aside 20-30% of your income for taxes. This way, you’ll always have funds available when your tax bill arrives.
Track Your Income and Expenses Regularly
Staying on top of your finances throughout the year will prevent any nasty surprises at tax time. Use accounting software to log your income and expenses monthly. This will give you a clear view of your profitability and help you forecast your tax liability.
We would advise keeping on top of your bookkeeping on at least a monthly basis to ensure consistency and accuracy. The more often you do it the more accurate it will be to get real time information on your finances.
Produce quarterly reports
Once a quarter, set aside time to review your finances. Look at your income, expenses, and how much you’ve saved for taxes. This regular check-in helps you identify any gaps early, so you can adjust your savings rate if necessary.
At Valorem Virtual Finance we offer a Management Reports service which allows us to give our clients an insight into their finances and Cash Flow Forecasts which can predict trends in order for you to take action ahead of any challenges you may face. This can be crucial when growing your business.
Automate Where You Can
Automating your savings can be a game-changer. Set up automatic transfers from your business account to your tax savings account. This takes the decision-making out of your hands and ensures you’re consistently putting money aside.
You can also automate reminders for tax deadlines or set up recurring tasks in your calendar for financial reviews.
Work with a Bookkeeper
If managing your tax savings and financial records feels overwhelming, consider partnering with a bookkeeper like ourselves. We’ll help you stay organised, ensure you’re meeting all your obligations, and provide peace of mind throughout the year.
Use Tax Time as a Business Health Check
Tax time doesn’t have to be purely transactional. Use it as an opportunity to reflect on your business performance. Are you meeting your income goals? Can you reduce expenses? Regularly saving for taxes puts you in control, so you can make informed decisions about your business’s future.
January doesn’t have to be stressful. By developing a habit of saving consistently throughout the year, you’ll not only avoid the last-minute scramble but also gain greater control over your finances.
Ready to take the stress out of tax time? Get in touch today.
The Valorem Virtual Finance Team
