By Daniel Hunter
A third of micro-businesses feel overwhelmed by accounting, according to new research from cloud accounting firm FreeAgent.
The survey found many micro businesses are struggling with the complexities of their accounts, while one in three (33%) micro-business owners responsible for completing business tax returns also feel anxious about those tax returns. Eight per cent admitted that they feel “very anxious” about completing their Self-Assessment, VAT and corporation tax returns.
The research, which was carried out on behalf of FreeAgent by YouGov, also suggests that poor organisation and inadequate systems may be among the main reasons for accounting anxiety, as one in five (20%) micro-business owners admitted that their main method to manage their financial accounts is via pen and paper, while around one in six (17%) said they did not have immediate access to all of their important financial information.
FreeAgent believes that hundreds of thousands of UK micro-businesses could be putting themselves in unnecessary jeopardy due to having ineffective accounting systems in place; as this means they may potentially be failing to record expenses properly and missing out on tax relief, as well as missing their tax return deadlines and being fined by HMRC.
These concerns appear to be reflected in the research, which found that that 13% of micro-businesses - equivalent to approximately 650,000 UK-wide - admit to missing tax return deadlines, with 9% (or around 450,000 micro businesses) receiving fines.
Ed Molyneux, co-founder and CEO of FreeAgent, said: “Anxiety about your accounts is a clear warning sign that you’re not on top of the numbers.
“To counter this, we recommend micro-business owners put robust systems and practices in place. The more organised you are, and the easier you make it to manage your basic accounting, the less likely you’ll be to feel overwhelmed or anxious about your finances.
“Also, when it comes to tax returns, it’s important not to panic if you miss a deadline. Filing your tax return late can be a scary prospect but as long as you do it as soon as possible - and settle your fine and actually pay the tax you owe - you should be able to avoid extra fines and scrutiny. And remember if there is a legitimate reason why you haven’t filed a tax return on time, HMRC will hear these reasons through a 'reasonable excuse' form and potentially cancel your fine. But the problem won’t go away by ignoring it.”