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Effective tax planning is essential if you are to minimise your tax bills. Simple tax planning can significantly reduce your tax liabilities.

The self-assessment tax return is an unavoidable burden if you are liable for self-employed tax or have complicated income tax affairs.

Corporation tax is charged on a company's profits. If you trade as a limited company, ensure that paying this tax is as painless as possible.

National Insurance Contributions (NICs) are payable whether you are self-employed or employed by your own company, although different rates apply.

As well as your legal obligations, you’ll want to ensure that payroll is painless and that you use any opportunities to improve your tax-efficiency.

VAT

Effective VAT planning aims to ensure that VAT is relatively painless, and that you are reclaiming as much as possible of the VAT you pay.

Capital gains are made when you sell something for more money than you paid for it. As a result, you can be subject to tax. Take professional advice.

Business property taxes apply to businesses with commercial premises.There are two commercial property taxes: business rates and stamp duty land tax.

If you have tax problems or face a tax investigation, it pays to seek professional advice and you must act rather than just hoping for the best.

55% of businesses have unpaid invoices from 2022

17 May 2023

55% of small businesses in the UK still have unpaid invoices from 2022, according to new survey data

A survey of 1,000 business leaders conducted by NerdWallet in April 2023 found that many small businesses are awaiting payments from up to six months ago.

  • 55% of SMEs have outstanding invoices from the 2022/23 tax year.
  • 46% said they had more outstanding invoices than the previous tax year.
  • A third of unpaid invoices were less than a month overdue.
  • 20% of overdue invoices were four to six months late.

Having a consistent flow of money is vital to the running of any business, and interruptions to this cash flow can prove to be a real problem for business owners and freelancers. From being able to ensure that salaries are paid on-time to covering bills and expenses, having overdue invoices can significantly impact the smooth running of small businesses.

In a new NerdWallet survey, 1,000 small and medium-sized enterprise (SME) owners, decision-makers, and freelancers in the UK were asked about their experience with late payments and how this has affected their business.

The survey found that over half (55%) of businesses still have outstanding invoices from the last tax year (2022/23). This is a problem that seems to be getting worse with time, as just under half (46%) of SMEs were left with more unpaid invoices at the end of the 2022/23 tax year than the previous year.

NerdWallet’s business finance expert, Connor Campbell, comments:

"At a time when many businesses across the UK are already facing an extremely turbulent period financially, the stress and uncertainty of unpaid invoices is an additional headache that no organisation will welcome.

"Our survey found that overdue invoices can have substantial effects on SMEs, causing them to make cut-backs on expenditure, recruitment, and even staffing. We were most concerned to see that so many business owners were simply happy to sit back and wait for these late payments without chasing up invoices.

"Of those that did pursue payment, very few opted to charge interest on repayments. Businesses in the UK are entitled to charge interest of up to 8% plus the Bank of England base rate for business-to-business transactions.

"This is an area wherein many businesses could be losing out on compensation for the inconveniences caused by overdue invoices, so it’s important for business owners and freelancers to be aware of the legislation surrounding repayments."

In terms of the length of time invoices were left unpaid, the majority had not been left unpaid for a long period of time. A third (35%) were less than a month overdue, with just over a quarter (27%) being between one and three months late. Shockingly, however, a fifth (20%) of business owners said they had outstanding invoices from four to six months ago.

These late payments can have significant repercussions on the running of a small business. NerdWallet asked SMEs what measures they had taken in response to unpaid invoices, with 39% saying they had either already had to, or thought they might have to, make reductions to their overheads.

This included actions such as downsizing office spaces and moving to remote working, alongside cutting team social spending budgets.

Recruitment also took a significant hit, with 28% of SMEs pausing their recruitment efforts due to having unpaid invoices. Additionally, a fifth of business owners said they had frozen planned pay rises for their employees.

Unfortunately, the survey also found that 22% of small businesses had, or might have to, make staff redundancies to compensate for their late payments.

The survey revealed that, in most cases, business owners typically waited a week before taking action for unpaid invoices.

In terms of how they went about chasing payments, half said they sent reminders every week until invoices were paid, while a quarter said they pushed for payment every day.

An additional 40% of SMEs followed up failure to pay with a phone call or letter.

Interestingly, only 23% of respondents told NerdWallet they charge interest on top of the agreed amount for each reminder, while only one in ten (11%) said they claimed debt-recovery costs.

Surprisingly, 14% of businesses had to use a debt collection agency to receive payment, while 8% said they had been forced to write off the invoice altogether. Perhaps most shocking of all was the revelation that 22% of small business owners were happy to wait and do nothing while the client remained unpaying.

Submitted by Magda Wilcox of Shout Bravo for NerdWallet.

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