Budgeting For Corportaion Tax: Your Guide to Being an Efficient Company Director
Part of the duties of a company director is to make sure that all taxes are paid, including corporation tax. Rather than leaving it to the last minute and hoping that you have enough money in the bank, it is often worth budgeting throughout the year. This is something that you can do for all areas of business to make sure you never face the distress of not being able to pay your corporation tax liabilities on time to HMRC – Tax Office.
All too often company directors forget that they owe the corporation tax 9 months after the year end. For example if your year end was 31st May 2013, meaning your financial start was 1st June 2012 you would not have to pay the corporation tax until 1st March 2014. So here are a few tips to keep you in line with paying your business tax on time.
Know Your Previous Tax Bills
The first stage of budgeting is to know how much you need to save. While it is not possible to know the exact amount, you can make an educated guess. Look at the amount you have paid for corporation tax over the last few years. Over-saving isn’t a problem since you can use it for the next year’s budget.
Divide the amount that you need to save by the number of months that you have to save. This will show you the amount you need to save every month to stay on track. Avoid trying to calculate any interest added on each month and be happy that you have a little extra now and then.
Know Your Previous Expenditure and Income
You will also need to know the amount that you have spent and earned over the last few years. It is not enough to take the yearly profit and loss; you need to look at each month to see where the money was spent, when you gained it and whether there are any special circumstances in payments. This helps to take in factors such as tax time, extra short-term employees over Christmas and summer or offering more overtime etc.
This takes time so you can delegate this duty to your admin assistant or whoever looks after the books. However, remember that the final liability lies on you so ask for regular reports and check work if you are not certain.C
Create the Budget Planner
Now that you know the previous spending, you can budget for the future spending. Create a spreadsheet with tables for the predicted and actual income and outgoings for each month. Break the outgoings down into different areas, including employee pay, tax liabilities, supplier costs etc to make it easier to understand, follow and update.
Make sure you cover all the necessary outgoings, including the rent for the premises, your employee pay and costs to your suppliers. The amount you need to save each month for corporation tax comes under the necessary outgoings. Have a specific savings account for that money to go into. This should never be touched apart from when paying your corporation tax bill. Limit the access to that account as much as possible so other directors in the business or other employees are unable to spend it.
Budgeting will not just help for your corporation tax. It will help to improve your cash flow and manage your money. It lowers the risk of struggling to pay your creditors and means that you can keep better track of how viable your business is and how viable it could be in the future.
Author The Author
Alex has written various business-related articles for Real Business Rescue (UK). Over the last year, she has written about HMRC, budgeting, corporation tax as well as detailed information about the legalities of business insolvency. Real Business Rescue is dedicated to offering advice to business owners about their tax liabilities and avoid insolvency by specialists in the industry.