March 20, 2022
Deborah Edwards
There's nothing quite like getting into a freshly made bed! Like all fresh starts, I’ll be exploring the significance the new tax year, why it should be celebrated and what it means to business owners regardless of when their business year ends. I’ll also be looking at how we can use it to align our work with our home lives, connecting with ourselves, our values and other people who matter to our businesses and how we can use these key annual milestones to bring energy and purpose into our businesses.
WHAT IS THE TAX YEAR AND WHY DOES IT MATTER ANYWAY?
All businesses are different but the one thing we all have in common as business owners is that our personal tax years all start and end at the same time specifically, starting on the 6th April & ending on 5th April; seemingly random dates, year in year out.
Here's a useless tax fact you never need to know:
The 6th April was set as the beginning of the tax year 400 years ago when efforts were made to align the Gregory calendar with Julian . The process was a slow burner taking about 200 years when it finally settled on 5th April. Maybe HMRC have always taken a long time to get things done?!
Another useless fact is that some tax rules are determined by whether a baked good goes soft or hard when stale, so you can see that behind the gruff exterior, of all things tax, there are some clearly bonkers and non sensical origins.
That said, having a firm beginning and end to the tax year is important and it does matter to you AND your wealth. Not only does it capture the period in which our personal tax bills are calculated on the money that we earn, but it also allows us to plan the money coming into our pockets strategically and by that, I mean making sure that as much of it as possible stays in our own accounts and not in the coffers of the government.
Now don't get me wrong. I believe that paying taxes is essential for living in a fair society, where everyone matters and can have access to excellent health care, education and clean water. I also believe that as part of the human race, we should use tax income to extend the hand of friendship and help beyond our own national borders, but I also believe that no one should pay any more tax than necessary, and that is where your responsibility for your own taxes comes into play.
SO HOW DO WE MAKE THIS AS EASY AS POSSIBLE?
Like the coming of Spring, the beginning of the tax year heralds new beginnings and like the traditional calendar new year, is a good time for contemplation and consideration of aspirations and new habits, or simply reflection and appreciation of our journeys so far, be they journeys in our business or closer to home in our family units. Perhaps last year you felt like you paid too much, or you simply didn't have a handle on what you paid at all. You didn't see it coming until it was too late or the thought of preparing your tax return left you waking up at night in a cold sweat.
Here are my 8 ways to get your new tax year off to a great start.
1. PUT LAST YEARS RETURN TO BED
It's hard to focus on the future when you've still got the past hanging over you. Use this handy checklist and make this year the earliest you have ever completed your accounts and tax return. The reasons for doing this are numerous but here's a few! 1. It feels good! 2. You have heads up on how much tax to pay and can formulate a plan to make the payment easier either by putting cash aside now or building it in to your cash flow. 3. When you complete your accounts and tax return AND PAY ATTENTION :) you learn something about your business. Maybe your margins aren't what they were and you need to amend your prices. Maybe you hadn't realised you were paying so much for something (it's always subscriptions) and can make positive change to your costs.
2. THINK OF THE NEW TAX YEAR AS A FRESH START
The energy of springtime is accompanied by a feeling of a “clean state”. In a sense, it’s also a time for resetting and our tax allowances (what the government permits us to earn "for free") reset at this time too, so at the time of writing you can earn £12,500 without paying tax on your regular income and sell assets with a fresh new threshold too.
It’s also a perfect time of year to set intentions for the year ahead and revisit business goals, looking both forward and backwards for inspiration. What has worked well for you in the past and has energised you. What do you want to do more of or stop doing? Think about financial and non financial factors, business and personal factors. Where do you want to take your business? How does it align to your vision in the beginning or is it even better than you imagined?
3. TAKE TIME TO WORK ON YOUR BUSINESS, RATHER THAN IN IT
Cliched I know, but take time out to give it serious thought. We can get stuck in a hamster wheel of always doing the same thing. Producing products with declining sales, networking with the same people where it's just not happening, offering a service that takes too long to deliver at a price the customer is prepared to pay. Recognise what's working & what's not. Your intuition will guide you much of the way, but sometimes you might just have to knuckle down with the numbers.
4. CREATE A SIMPLE BUT ROBUST SYSTEM
The beauty of a good system is that it takes away the majority of the functional system. It makes life easier. Systems plus software make for stressless business management, especially where finances are concerned. Get a big sheet of paper and some pens and plot out your system. Highlight points on your system that you enjoy and those you don't. . Designate the trigger point for each action, e.g. when do you send out an invoice, how often should your bank be reconciled. How often do you look at sales and when do you pay suppliers. Identify and highlight points that could be automated or outsourced to a VA or book-keeper.
5. RE-AFFIRM YOUR INTENTIONS (AND GOALS)
It always pays to stand back and check in with you mission and values. Are you doing what you envisaged? If not, how does that sit with you. This could be ok. Rarely do businesses turn out the way we anticipated. If you find yourself doing work that isn't right, make a conscious decision on how you will proceed in the future. Do you want to set goals? For some they are great drivers of change and achievement but if you know you won't take any notice of them then don't waste your time! However you progress, make sure that it is done consciously rather than blindly with an approach that is right for you.
6. BREAK THE YEAR INTO QUARTERS
Just like the seasons, the financial year is broken down in to quarters. Your business is no different and put simply, can be broken down into 90 days, which has benefits in itself. Ninety days is often viewed as a manageable amount of time to set and achieve meaningful business objectives, favoured instead of year long agendas.
7. CREATE THE RIGHT SPACE & TIME TO MANAGE YOUR BUSINESS FROM
Have you noticed how you work well in some spaces but not in others? Or perhaps the same space is more motivating at different times of the day. Take a note of where you work best to do deep thinking work. Does it require total silence or do you like to be motivated by people who are also working at the same time? Is the buzz of a cafe with unlimited coffee and cake your thing? Most importantly, do not leave business and finance management to out of hours time. You may be thinking that "working time" hours are for clients, but this can often lead to management blindness and resentment as the business distracts from previous time spent with people you care about or simply relaxing.
8. PLEDGE TO STAY WITHIN YOUR ZONE OF GENIUS & STAY IN YOUR LANE
I don't know about you but there are so many times that I find myself doing things I shouldn't be. Distractions like social media can often send you into shooting off sideways, even if it's work related or you are undertaking a task that doesn't come easily or you can do it but it takes ages. Again, consider how you can move away from this being a consumer of your time by automating or outsourcing. If outsourcing seems a cost too far, consider how spending your time generating sales might actually be better for you and enabling you to service that cost.
