The FreeAgent Blog
When you first got together, everything was great. Side by side, you felt like you and your spreadsheet could take on the world. But then the cracks started to show - sure, your spreadsheet was great sometimes, but you couldn’t help feeling that they were actually holding you back...
If you’re harbouring doubts about whether your spreadsheet is up to the job of managing your small business finances, maybe it’s time for a reality check. How many of these ring true?
You have needs that it just can’t fulfil 🤔
Ok, you can do some basic stuff with spreadsheets, like record money in and out, do sums and maybe generate some graphs and reports if you’ve got the time and the know-how. But you deserve more and they just can’t deliver when things get serious. When you rely on a spreadsheet you still have to create and send all of your own invoices, follow up on late payments, run payroll yourself, and more - you’re the one putting in all the effort.
For your small business bookkeeping, you’ll save yourself time, money and stress by letting FreeAgent step up to the plate and actively do the hard admin work for you. Whether it’s sending and chasing invoices, running payroll for you, expense recording, time tracking, building reports, tax return submission - FreeAgent really can be there when you need it.
They’re not worth your time 😢
As a business owner, your time is precious and it’s best spent with your other love - doing work that earns you money. Having to laboriously enter data by hand into a spreadsheets is a massive time drain, plus most processes can’t be automated. Dull.
With FreeAgent you can save yourself serious time on a daily basis. So much is done for you automatically: invoice reminders, importing bank transactions from your bank into FreeAgent, automated online payments from your customers, reports on the financial state of your business generated at the click of a button - you get the idea. You can even use FreeAgent integrations such as Receipt Bank to gather your paper receipts, scan them and process the data into FreeAgent, with only a few clicks from you. Dreamy.
It’s not just them, it’s you 😮
Yeah, sorry about that. Since you have to do all the hard work inputting data into spreadsheets and you’re human, it’s possible that errors can creep in.
Don’t believe us? Human error in spreadsheets has been responsible for some deal-breaker level mistakes. In 2012, JPMorgan Chase incurred a whopping £6 billion trading loss due to a blunder related to using the wrong formula. Awkward. Organisers for the 2012 London games also famously oversold a swimming event by 10,000 tickets, all due to a single keystroke error which made it appear as if 20,000 tickets were available when the venue could only accommodate half that number.
Mistakes in spreadsheets are easy to make but hard to catch - don’t take the risk when it comes to your small business finances.
They’re chock full of insecurities 🙄
If you’re saving spreadsheets locally on a PC or laptop and your machine stops working, you might be waving bye to the data in them for good. FreeAgent's cloud accounting software is completely web-based - there's nothing to download, update, or install and you can access it at any time, from any computer/device.
Version control is also a constant risk with spreadsheets - how many times have you been pinging a spreadsheet back and forth with your accountant and then accidentally used the wrong version? There's no need to have ‘final-final-v2.xlsx’ with FreeAgent.
When you use FreeAgent, your data is is stored in a nuclear bunker. Literally. It’s not romantic, but it’s certainly secure, meaning you can safely access your accounts at any time and from any device. It uses bank-level security so you can finally kiss goodbye to insecurity worries.
They always cause a drama at tax time 😭
At tax time you need a supportive partner that will pull their weight, not someone who expects you go raking through a plastic bag full of receipts and do all the hard work.
You can count on FreeAgent to have your back and be there to help. Because you’ve been automatically importing your banking data and managing your invoices and expenses regularly, most of your data is already there. FreeAgent uses that data to show you a real-time forecast of how much tax you owe and when it’s due (no shocking revelations at deadline time!). You can also file VAT and Self Assessment directly to HMRC through FreeAgent itself, so your tax return process is as drama-free as it can be.
If 2017 is the year that you finally kick outdated accounting to the kerb, FreeAgent is here to show you true happiness. It’s specifically designed for freelancers and small businesses so you know it’s right for you - give it a try for free today and never look back 😘
It’s been just over a week since the Self Assessment deadline - and unless you were one of those super-organised people who got their tax return completed months in advance, chances are that you found it stressful trying to get all of your financial information correct and submitted to HMRC on time.
So how can you avoid this hassle next time your tax return is due?
Here’s our top tips for getting your books in order now, so you can avoid a Self Assessment headache next year:
Collect and file everything as it arrives
It’s not uncommon for small business owners to find themselves searching desperately for a vital receipt or bank statement to include in their tax return. So if you had that problem, you can prevent it from happening next time by setting up a file to keep your paperwork in for your tax return.
If you only have a little paperwork, for example interest on one bank account and two dividends each year, then you could use a simple box file. However, if you have more paperwork to deal with, you may want to consider using a lever-arch file with dividers so that you keep different documents separate from each other. Then, as each different piece of important paperwork arrives, put it in your file ready for when you come to prepare your tax return.
Get into good habits - manage your books regularly
If you run your own business, don’t leave the bookkeeping till the last minute! Otherwise you’ll be frantically looking through all of your expense receipts and bank statements next January, trying desperately to work out how much money you’ve made and how much tax you owe.
An effective bookkeeping system can take as little as an hour a week to maintain. Just make every simple task like invoicing, managing expenses and forecasting your tax an integral, but manageable, part of your working life. You might find it’s easier to create a routine by keeping the same time every week - for example an hour on a Monday morning - to look at your current financial position, create, send and chase invoices and log your most recent expenses.
Don’t wait to file your next tax return
You can’t file your tax return for 2015/16 until after 5th April 2017 (the end of the tax year) - but it’s a good idea to file it as soon as you can after that date, once all your paperwork has arrived. This means you’ll have one less job to worry about and can concentrate on running your business.
It’s also potentially good news from a tax point of view, because if your tax and class 4 NI liability for 2016/17 is less than your liability for 2015/16 was, then you may be able to reduce your 31st July 2017 payment on account. Also, if you’re due money back from HMRC, the sooner you file your tax return, the sooner they will repay that to you!
Use the right tools for the job
Spreadsheets are great for some simple tasks, but if you’re using them for small business accounting you’re actually creating more work for yourself. Spreadsheets are limited in functionality, time consuming and insecure, not to mention prone to human error. A new year is a great time to improve your processes and you can trial FreeAgent’s accounting software free for 30 days to see the difference it makes.
When you use FreeAgent you’ll be saving yourself time and effort. You can feed bank transactions into your accounts automatically, track expenses on the go using your smartphone, send your invoices by email and automatically chase up late payments. This will mean your data is always up to date, so you can see a real-time forecast of how much tax you owe and when it’s due (no nasty surprises next deadline!). You can even file your Self Assessment tax return through FreeAgent, so you can look forward to a whole lot less hassle next January!
It’s been quite a day - not only is it the Self Assessment tax deadline but HMRC has today published the eagerly anticipated response to the Making Tax Digital (MTD) consultations.
The consultations, which ran from 15th August to 7th November last year, asked for feedback from interested parties on the government’s plan for ‘a transformed tax system and the end of the tax return’ by 2020. The consultation looked at how digital record keeping and quarterly updates would work in practice.
HMRC received 618 responses from a broad spectrum of stakeholders, especially businesses, including the self-employed and landlords, as well as agents, trade and professional (tax/accountancy) representative bodies, software developers and insolvency practitioners.
Now that the response to the consultation is out, here’s an update on what we know:
More clarity on software and reporting
Sole traders and partnerships will need to send summary data about their business on a quarterly basis through digital means. Taxpayers who are currently using ‘three line accounts’ (where they report only income, expenses and profit) to HMRC will be able to continue submitting only three lines of data under MTD.
The consultation response says that while spreadsheets will be acceptable under MTD, they must meet the following requirements:
- they must include digital record-keeping functionality
- they must provide quarterly information updates
- they must support end-of-year activity
HMRC says that it is likely that spreadsheets will need to be combined with software in some way in order to meet these requirements. The question of how this could work will be explored in more detail during the initial pilot scheme, which begins in April this year.
HMRC has also said it is working closely with the software industry (we are part of this work), to ensure secure and effective MTD-compatible software is available.
Update on timeline for smallest businesses
In FreeAgent’s official response to the consultation we said we’d like to see the smallest businesses given a bit of additional time to prepare for MTD, rather than facing the same deadline as larger companies who will be better equipped to make the changeover.
We recommended that all unincorporated businesses making less than £83,000 - the VAT threshold - should have an additional year to prepare before they have to adhere to the new digital tax regime.
The consultation response has confirmed that MTD is still planned to be rolled out in April 2018. However, the consultation response also announces that the number of businesses and individuals affected, and the impact on them, will be reviewed throughout 2017, as large scale piloting takes place before the mandatory introduction of MTD.
Threshold decision yet to be made
HMRC had previously proposed a £10,000 threshold for exempting businesses from MTD. This was viewed by most respondents to the consultation as too low, suggesting that the imposition of the MTD obligations on businesses with such a low income would be unreasonable.
As there were a wide range of views about the threshold, the government has said that it is going to take more time to consider these issues. According to the documentation, we should expect a final decision on these points later this year.
Stay up to date on Making Tax Digital
You can read the consultation response yourself for more information on the proposals. We’re keeping a close eye on the progress of the Making Tax Digital plans and will be keeping you up to date!
If you’re not expecting to complete your Self Assessment tax return by the deadline of midnight on 31st January, you’re not alone. Last January around 870,000 taxpayers missed the 2016 tax deadline and paid a £100 fine, plus extra penalties in some cases. If you’ve not been able to complete your tax return in time, here’s what you need to know.
The world is not going to end if you miss the deadline - filing your tax return a couple of days late will earn you nothing worse than a £100 fine at this stage (although HMRC will also charge you interest if you have failed to pay your tax on time too).
However, you still need to act, and quickly. Remember that the longer you take to submit your Self Assessment tax return after the deadline, the more fines you will incur – so that initial £100 penalty may start getting larger! HMRC may also start to charge additional penalties depending on how long it takes you to pay your tax. The quicker you submit your tax return and pay your tax bill, the better.
Appeals are possible with ‘reasonable excuses’
HMRC does allow appeals against penalties for late returns, if there’s a reasonable excuse (defined as “something unexpected or outside your control that stopped you meeting a tax obligation”). HMRC aims to treat those with genuine reasons leniently, as it seeks to focus its penalties on deliberate tax evaders and those who persistently fail to complete their tax returns.
Life happens, so if you have a valid reason as to why you couldn’t complete your tax return, HMRC will consider your appeal and make a decision about whether they consider your excuse to be reasonable.
What counts as a reasonable excuse?
A reasonable excuse is normally something such as a serious illness, or a death in your immediate family. Other examples of reasonable excuses might include:
- an unexpected stay in hospital
- a serious or life-threatening illness
- your computer or software failing just before or while you were preparing your online return
- a system failure with HMRC’s online services
- a fire, flood or theft preventing you from completing your tax return
What won’t cut it as a reasonable excuse (spoiler: wasps in cars)
HMRC receives some pretty interesting appeals! In the past, these have included “a wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed” and “my husband told me the deadline was 31st March”. Needless to say, these reasons were not accepted as reasonable excuses, but there are also some more pedestrian excuses that have been refused in previous years. These have included:
- relying on someone else to send your return who has then failed to do so
- your cheque bouncing or payment failing because you didn’t have enough money
- finding the HMRC online system too difficult to use
- failing to receive a reminder from HMRC
- making a mistake on your tax return
If you relied on your accountant to complete your Self Assessment, but they failed to prepare and submit your tax return on time, you may think that would be a reasonable excuse for missing the deadline. Unfortunately this is not the case, as HMRC still hold you responsible for your own tax affairs even if you have used an accountant.
What to do next
If you believe you have a reasonable excuse, you need to let HMRC know as soon as possible. If you miss the deadline then HMRC will send you a penalty notice, but you don’t have to wait until they do; fill in and submit a claim form as soon as possible. You must also send your return or payment as soon as possible after your reasonable excuse is resolved.
If in doubt, speak to your accountant and get their advice on whether you have a valid excuse for missing the filing deadline or not, or contact HMRC directly to explain your circumstances.
If you’re facing an appeal, best of luck in getting it resolved. If your experiences this year have inspired you to get organised, FreeAgent can make taking control of your business finances easier in the future. Take a look at how using FreeAgent makes Self Assessment less stressful.
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- You deserve better: why you need to break up with your spreadsheet
- Simple ways to save yourself future Self Assessment stress
- Making Tax Digital consultation response published
- Not feeling (a) fine? You might have a ‘reasonable excuse’ for not completing your tax return
- Don’t be caught out by the Self Assessment deadline!