Understanding VAT: How to Stay Compliant and Save Time with Stress-Free VAT Returns

Introduction:

VAT might not be the most exciting part of running a business, but it’s one of the most important. With multiple VAT schemes, ever-changing rules, and strict deadlines, it’s easy to feel overwhelmed. Whether you’re just getting started or have been trading for years, getting your VAT returns wrong can lead to penalties and lost time. But with the right support, it doesn’t have to be that way.

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Making Tax Digital: What It Means for Your Business

Staying ahead of tax changes is easier when your accountant is ready by design.

At Love Accountancy, we have been MTD-ready from the start, meaning our clients can move confidently into the future of digital tax compliance without extra hassle, stress, or hidden costs. If you are wondering what Making Tax Digital (MTD) means for your business and how to prepare, you are in the right place.

Why This Matters

Keeping on top of tax deadlines and compliance requirements can be time-consuming, especially when HMRC rules keep changing. MTD is not just about ticking a box; it is about making your financial processes more efficient, saving you time, and reducing the risk of errors. Businesses that embrace digital tools like Xero not only stay compliant but also benefit from real-time visibility of their finances.

At Love Accountancy, MTD is built into how we work, helping you focus on growing your business – not grappling with spreadsheets.

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The Biggest Cash Flow Mistakes SMEs Make (and How to Fix Them)

Cash flow is the lifeblood of any business, but for many small businesses, it’s one of the hardest things to get right. You can be profitable on paper and still run into serious financial trouble if money isn’t flowing in and out at the right time. The good news? Most cash flow issues are completely avoidable with the right systems and habits in place.

Let’s take a look at the biggest cash flow mistakes we see, and how to fix them before they cause real stress.

Why This Matters

When cash flow goes wrong, it doesn’t just cause short-term stress, it can hold back your growth, damage your relationships with suppliers, and even put your business at risk. By addressing these common pitfalls, you can free up headspace, build financial confidence, and focus on growing your business with clarity.

At Love Accountancy, we help SMEs take control of their cash with smart tools like our Cash Management System and Xero integrations, so money flows in the right direction, with no nasty surprises.

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How to Take the Stress Out of Tax Returns: A Step-by-Step Guide

Introduction: Tax Returns Don’t Have to Be Stressful

Tax return season often brings a wave of stress for business owners and self-employed professionals. The fear of getting something wrong, missing deadlines, or paying more tax than necessary can make it a daunting task. But here’s the good news, filing your tax return doesn’t have to be a last-minute panic. With the right approach, tools, and a little forward planning, you can make tax season smooth, stress-free, and even beneficial for your business.

At Love Accountancy, we believe in making accounting effortless. In this guide, we’ll walk you through a step-by-step approach to taking control of your tax return, avoiding common mistakes, and, most importantly, reducing stress.

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VAT and VAT registration

These videos will help you understand a VAT registration and how to do your book keeping once you are VAT registered:

Understanding the implications of being VAT registered:

• Create a sales invoice for any sales or work you do
• Watch: this video takes you through the process of creating a sales invoice in Xero: https://www.loom.com/share/9df8d9e99de743209fc266a39adf5516
• Read: http://www.loveaccountancy.co.uk/how-to-create-a-sales-invoice-in-xero/ for guidance on how to create an invoice – this is a useful guide when used in conjunction with the video above

• Process any purchase invoices or receipts as bills – this is a similar process to raising sales invoices. Remember you can attached scanned copies of any invoices or receipts received – we recommend doing this for ease of review and as evidence
• Watch: https://www.loom.com/share/9227978d4ea24adfb7e0c6ae4e622587 – this video takes you through the process of inputting a purchase invoice into Xero.
• Read: http://www.loveaccountancy.co.uk/how-to-process-a-purchase-invoices-bill-into-xero/ on how to process bills (this is a good summary guide to reference after watching the video above.
• If you have expenses that you paid for out of your own pocket (cash or personal bank account), mark these bills off as paid to the “Director’s Loan Account” if you are trading as a Limited Company or the “Capital Introduced” account if you are trading as a sole trader or partnership.

• Match bank receipts and payments with sales invoices and purchase bills. Create new transactions/transfers if necessary.
• See http://www.loveaccountancy.co.uk/how-to-reconcile-the-bank-in-xero/ on how to reconcile the bank
• If you’ve bought something using the business money that is personal in nature, you can reconcile this to the “Director’s Loan Account” if you are trading as a Limited Company or the “Drawings” account if you are trading as a sole trader or partnership.

Things to think about before your year end…  These may help reduce tax 

The best thing you can do is book a meeting with us as early as possible before your year end: chat.loveaccountancy.co.uk

• Making a larger pension contribution
  • Paying into a company pension is a tax efficient way of putting money away for your future. The true cost to putting £10,000 into a pension is currently £8,100. 
• Buy any large assets before year end
• Have all director expenses/mileage been put through Xero
• Do the statement balances on the bank accounts on Xero match your bank balances?
• Review salaries and bonuses – year end is a good time to declare bonuses to help reduce tax bills 
• Consider R&D – have you taken on any eligible research and development projects in the year that could receive accelerated tax relief. 
• Have you made use of the trivial benefits.
• Ensure your sales ledger is up to date and overdue invoices are chased. Love Accountancy can help you with this if necessary. 
• Review our year end checklist.

Help us to help you

• Help us get your accounts completed earlier by making sure Xero is as up to date as possible now, rather than later… 

Smaller considerations: 

• Staff events – each year a company can pay for annual staff events up to £150 (including VAT) per guest which is allowable for Corporation Tax relief. The rules are that all members of the company must be invited and a spouse or partner can attend provided the cost for the couple does not exceed £300 (including VAT). It will be tax free provided the limit is not exceeded, if it does the whole cost is taxable, not just the excess. This is not an allowance, you must include the actual cost of the event and have receipts to support this.
• Stock up on office supplies – for example printer cartridges, paper, stationery or other general office supplies.
• Consider trivial benefits for employees and directors – £50 limit : https://www.gov.uk/expenses-and-benefits-trivial-benefits – remember these must not be a “reward” or be considered contractual in nature

Things for Love Accountancy to consider:  [LINK TO INTERNAL HUB]

Updating bank feeds every 90 days

Please log into Xero and renew any bank feeds you have set up. You should see the option to update the feed on any accounts that need it. 

Please note, if you use Starling bank, you’ll need to update the bank feed in the Starling App, not in Xero! 

Why do I need to do this? 

As part of new rules around open banking, you will have to log into Xero and update your bank feeds every 90 days. Depending on the bank you use, you may get a reminder to do this (Starling for example will notify you in App, which is where you can make the update). 

If we spot that you need to update your feeds, we’ll notify you by SMS (text message). Please act on this quickly. 

If you don’t update the feed before the feed is severed, then bank transactions will be missed and this can cause issues further down the line, with missed transactions and or the need to request bank statements for the whole year. 

Here is the text from Xero about why you need to renew every 90 days: 

Authenticating your bank feed

When you connect a new bank feed or change your existing bank feed connection, as part of the new requirements, your consent will last for 90 days. After 90 days, you’ll need to re-authenticate your bank connection. Xero will remind you when you need to do this – it’s as simple as re-entering your online banking credentials. Whilst it’s a little extra admin, this is a new standard under Open Banking.

If you don’t re-authenticate my bank feed after 90 days, you can re-authenticate your bank feed at a later date. You’ll just need to make sure you import historical transactions back to the date your bank feed stopped importing transactions so there isn’t a gap. You can only import 90 days of historical transactions when re-authenticating your bank feed. If you need more historic data you’ll need to manually import transactions into Xero.

Further reading and source: https://www.gov.uk/government/news/furlough-scheme-extended-and-further-economic-support-announced

Businesses required to close:

Restaurants, bars and pubs will be required to close but can continue to offer takeaway services. In addition, the following businesses will be required to close:

1. all non-essential retail (clothing, electronics, betting, tobacco and vape shops, betting shops, tailors, car washes, vehicle showrooms and travel agents)
2. indoor and outdoor leisure facilities (gyms, swimming pools, gold courses, dance studios, shooting ranges and stables/riding centres)
3. entertainment venues (theatres, cinemas, bingo halls, casinos, zoos and animal attractions)
4. personal care facilities (hair, beauty and nail salons, tattoo parlours, spas, massage parlours, non-medical acupuncture and tanning salons)

Non-essential businesses can continue to offer delivery and click and collect services.

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