To turn your finances around, Tracy Ebdon-Poole, CEO of TaxCalc.com, a tax returns software company, offers her top tips for January to keep your business out of the red and get the new year off to a healthy start.

Don’t forget to file your tax return
Last year 10 per cent of tax returns were handed in after the 31 January deadline, leaving the offenders open to penalty fines. Don’t panic if you have forgotten your tax return - there is still time to submit it.

Make sure your record keeping and book keeping is up to scratch
You must keep a record of all income and expenses and keep the backing documentation for, effectively, six years after the end of the tax year, or you may face a maximum penalty of up to £3,000. HMRC has issued an excellent "Janet and John" style booklet explaining what records a self-employed individual should keep. Start filing paperwork now and save yourself a scramble next year when you are filing tax returns

Check what tax relief you are entitled to
Don’t believe everything you are told as there are lots of myths about what expenses can be claimed for tax purposes . Tax relief is due only for expenses which are incurred wholly and exclusively for the purposes of the business, although in practice HMRC does allow proportionate claims to be made for assets like cars, which are used partly for business and partly for private purposes

Don’t get caught out: foreign properties get taxed in the UK
If you invest in overseas properties you must declare profits in the UK. You are taxed in the UK on all your property income, regardless of where your properties are located, if you are UK-domiciled. If you are not UK-domiciled, then you will be taxed on property income brought back into the UK. You may also have to complete a tax return for that country - don’t worry, if your UK tax bill is higher than the foreign one, you won’t get taxed twice.

Plan ahead and have cash at the ready

The income tax due for 2005/06 is due on January 31 2007. A payment on account of the 2006/07 liability will be payable on the same day. This is 50 per cent of the previous tax year. In a business’s first year this means that your tax bill could be 150 per cent of the tax you owe. Make sure the cash is there to pay the bill. Interest will start to run immediately on unpaid tax. In addition, there is a five per cent surcharge on all tax still owed 28 days after the deadline (i.e. the end of February). This equates to an annual interest rate of 65 per cent. This surcharge is repeated in July.

Self-employed? Work from home
If one room was used partially for the business you could apportion all household expenses (including heating, lighting, rates and mortgage interest) and claim a proportion. Beware of using a room at home exclusively for business as this could put you in danger of losing some capital gains tax exemption when you come to sell the property.

Tracy said: “We all get stressed about our finances, especially those who are self-employed. Healthy finances can improve other areas of your life, reducing stress and allowing you to treat yourself.”

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Susie Hughes
The Editor © Hardhatter 2006