You live and learn.

There’s never a good time to get stung by an unexpected tax bill. Trust me, I’m speaking from experience. I’m writing this post to ensure that you don’t make the same mistake I did. 

Recently, I spunked all of my savings on a 10 month trip. Waiting for me on my return to the UK was an extortionate tax bill from the previous tax year. You can imagine my shock and the subsequent panic.

It was a complete oversight on my part, and as stupid as this sounds, I simply forgot to submit my tax return before I buggered off travelling. So, the late payment fee I also incurred could have been avoided. The annoying thing is, I kept track all of my incomings and business expenses, calculating them precisely to the penny. 

What threw me off my impeccable record keeping was starting a full-time PAYE position half way through the tax year. That, combined with planning my trip and the fact my self-assessment tax return was all but submitted, lulled me into thinking everything was sorted. It was a hard pill to swallow but has taught me a valuable life lesson – especially as I’m now working for myself again.   

While keeping business records isn’t the most thrilling way to spend your time, it’s necessary. It gives you an overview of your business’ finances and helps you claim all your expenses back. Most of all, though, keeping records can save you from a serious headache if the HMRC decide to audit you.

The HMRC requires you to:

·       Keep a record of all your allowable business expenses.

·      Store all original documents, such as invoices and receipts, for at least five years.

That’s why it’s important to make sure you:

·       Track everything you spend accurately.

·       Keep it all organised.

·       Store it all somewhere safe.

·       And most importantly, remember to submit it when it’s due.

I keep all of my receipts and invoices both electronically and physically, I also track my spending on a spreadsheet. I prefer doing this myself, rather than paying an accountant to do so. I feel it’s good to have some understanding of how these things work for yourself. If you have a good system in place, keeping track of your expenses isn’t hard work. There’s also a wide range of apps that help you keep track of everything, perfect if you aren’t overly organised.

Just in case, keep a backup of all your files somewhere. Receipts can become illegible, so an electronic backup is usually best. This is as easy as sending yourself photos of them and filing them within your email inbox. It’s a safe bet to keep a local folder on your hard drive too.

Stay on top of it, it's less effort if you do it little and often. And finally, don’t be as stupid as me! Double-check everything.

You’ve only got a couple of days to get your self assessments in and pay your tax if you haven't already. 

Shit, that reminds me...