With the self-assessment deadline looming for the 5.4 million Brits who are yet to file their tax return, over 640,000 are set to file late according to the latest data published by FreeAgent.
A survey of over 500 British small businesses conducted in early January by Censuswide for the accounting software provider FreeAgent sheds light on how SMEs are progressing with their tax returns. Its key findings show that:
- 42% typically file their return before the New Year;
- 46% admit they procrastinate when it comes to completing and submitting their tax returns;
- 35% leave their filing until January;
- 12% admit to filing after the deadline, risking penalties.
It means that around 640,000 small businesses could file late this year and incur fines as a result.
How long does it take to complete a tax return?
The data highlights the ongoing struggles of small businesses in managing the tax filing process, with many still reliant on outdated methods and overwhelmed by the complexities of self assessment.
One in five of the businesses polled (20%) say it takes them over nine hours to gather materials for their tax returns. In contrast, 13% said it took them less than five hours to complete the process. However, 27% of small businesses still rely on pen and paper for their tax filings, while 44% use online accounting software.
Despite this, the majority (84%) of small businesses are still chained to their desks when submitting tax returns, with only 1% of those surveyed submitting their tax returns while travelling or on holiday, and 70% choosing to submit directly to the HMRC website.
Almost one in three business owners (31%) say that they are stressed about filing their taxes. However, encouragingly, 62% said they felt calm and relaxed when thinking about their tax return.
"While it's positive to see many businesses filing their taxes before the New Year, it's also surprising to see how many are still following outdated methods for completing their tax returns - such as relying on pen and paper or being confined to their office in order to submit the forms to HMRC. Despite technology providing people with greater flexibility than ever before when it comes to their financial admin, just 1% of those we surveyed said they were actually using it in order to submit their tax returns outside of their traditional work environment. With the government's forthcoming Making Tax Digital (MTD) for Income Tax legislation aiming to digitalise the tax submission process for millions of UK small businesses over the coming years, technology is going to become a crucial tool for anyone reporting their tax to HMRC." Roan Lavery, ceo, FreeAgent.
Making Tax Digital (MTD) will require businesses to file more regularly throughout the year. However, while 31% of small businesses say it would positively improve their financial habits such as budgeting and saving, 31% say it would negatively impact them.
Written by Rachel Miller.