How to do a Self Assessment for a small business client

Tax season can be stressful for accountants, CPAs and bookkeepers. All too often, business owners forget to submit documents or pay attention to the approaching tax deadlines till it’s almost too late.

As a result, the month leading up to the Self Assessment deadline can be full of sleepless nights, long hours and unnecessary headaches for accountants. But, with a bit of planning, better collaboration and help from your clients, you can make last-minute tax returns a thing of the past.

Keep reading to discover advice on how to do a Self Assessment for a small business client, including:

• Accountants’ role in Self Assessment
• How to plan ahead with Self Assessments
• Advice on getting your small business client to onboard

Most small business owners don’t feel confident or comfortable with finances as they lack the financial knowledge to balance their books and keep accurate records. So much so that small business owners account for £13.4 billion of the existing tax gap.

Given their lack of financial literacy, it’s not surprising that many small businesses turn to their accountants for advice and guidance on how to file their Self Assessment tax returns.

While it may seem tempting to simply do all the hard work for them, it’s crucial to bring your small business clients on the journey with you. The more you can teach them about their finances, the fewer errors you’ll need to fix and the more they’ll be able to handle without your support.

Financial literacy also plays an important role in the overall success of a small business. Understanding finances helps small business owners:

• Create sensible budgets
• Avoid poor cash flow
• Gain better control over their business
• Set the right foundations for scaling and future growth

It may be tempting to leave Self Assessments to the last minute, especially if you’re busy with bigger projects. But, planning ahead can not only take some of the pressure off leading up to the January 31st deadline but can also greatly benefit your small business clients.

After the next tax deadline, make time to sit down with your small business client and review their financial performance. While you’ll have insights into their financial performance, it’s important to bring them into the conversation by asking them questions like:

• Where do they see their business going over the next year?
• What changes are they planning to make?
• What turnover do they expect to make next year?

By helping them set targets and create a financial roadmap, they’ll feel more empowered to take an active role in their finances. This conversation will also help you identify how you can change your tax planning strategy to minimise liabilities for next year.

Halfway through the year, sit down with your small business client again to assess how they’re getting on. Are they reaching their financial goals? Are there any changes they can make for better results?

At this meeting, make sure to walk them through their finances to understand how they’re performing, where they’ve hit snags, and how close they are to achieving their goal.

Two months before the Self Assessment deadline, send them a list of all the paperwork they’ll need to collect. Hopefully, they’ve been keeping digital records, but these records might not be complete or may have been forgotten about entirely.

Remind them that you’ll need all their:

• Invoices
• Mileage logs
• Expense receipts
• Bank statements showing transactions, charges and interest
• Transaction details
• VAT returns

Encourage them to collect and upload this information to your accounting software, as this will save you headaches and hassle as the Self Assessment deadline gets closer.

Hopefully, your small business client has gathered all the paperwork by now, uploaded it to the system, and you’re all set to complete their Self Assessment return.

Before you hit submit, have another quick call with your small business client to explain the financial information to them, how much tax they’re likely to owe and advice for making the process smoother next year. 

Completing a Self Assessment for a small business client will be much easier if you can get them on board. Here are three ways you can bring them up to speed.

With Making Tax Digital coming into force in April 2022, all businesses will need to transition to accounting software. Even if your small business client is below the threshold, it may be a good idea to get them set up regardless, as it’ll make it easier for them to keep track of their paperwork and monitor their finances throughout the year.

For small businesses managing finances for the first time, Self Assessments can seem overwhelming and scary. It’s important to explain the process, what it means for them and how they can help. Understanding the wider context will put them in a better position to help you help them!

Remember, small businesses may not have the same cash reserves as bigger clients, so it’s important to let them know early about their tax liabilities and help them create a budget for paying on time. You may also need to remind them about the payment deadlines.