Personally, I think the tax burden now on the shoulders of my fellow entrepreneurs and business owners has become so high that it does make business tough. Tougher than it was 20 years ago for sure. The benefits have been stripped away, almost as though we are being pushed into jobs we never wanted just to make ends meet.

These are some of the key ways tax may be secretly killing your business, and things you can do to reverse that.

The “I’m newly VAT registered” business

Well done! You made it! You are making money and you should feel a sense of pride. Taking something from nothing to the VAT threshold is no small feat. I remember when I was getting to the point of the threshold and I wanted to stop making sales to save myself the tax.

What a poor mindset that was! Imagine stopping your business growing, stopping its potential impact, because you didn’t want to pay VAT. The reality is, it was painful to begin with until my business grew from £100k per year to £100k per month. Then it became less painful.

I wish someone would have told me what VAT stood for. It stands for Value ADDED Tax. You see, I didn’t treat it that way, I treated it like a “I’m paying this 20% tax on behalf of my clients”. You see, my business works with individuals, not businesses that can claim back the VAT. I almost killed my business, well, at least limited its growth in that first 6 months by paying the VAT on behalf of my clients instead of adding that 20% tax on top of my current prices. Don’t do what I did in the first 6 months.

The “Oops I forgot to save my tax” entrepreneur

We’ve all been there, particularly my fellow ADHD business owners who maybe sometimes possibly forget some of the admin details that they need to stick to when running a business. We get excited by the money in our account and instead of saving up the part we need for tax, we spend it. I’m not saying you spend it on stupid things (not always) but on resources, tools, marketing that you feel will help the business grow.

Really, we need to be putting aside a % of our revenue each month. As I have been burned by this, I now go hardcore on this. I put aside 20% of revenue automatically each month for my VAT, then I put a further 50% of net profit away too for each month. That way there will be no nasty surprises AND I leave extra money in the pot. Then at the end of the year I have overflow money for some maybe less essential business expenses.

The “I’m going to lose my clients if I increase prices” solopreneur

STOP IT RIGHT NOW! If your business has a valuable service for people then you deserve to be paid for it in a way that compensates you abundantly, not enough to just survive. This is often a money and business mindset for people. How did you come to choose your current pricing? Think about it, truly. You probably just made it up! You may tell yourself that you looked at your industry and what others do etc. Rubbish. You picked it out of thin air. And hey, if you think you are only as good as the industry standard, then fine, charge that. Are there others in your industry charging more? Do they still exist? Do they still have clients? Yes, they do… otherwise you wouldn’t know about them.

In my business there is a lot of competition. Ultimately my business teaches people how to generate wealth through 30min daily trading strategies. There are companies out there that charge a fraction of what I do for my services. The reality is that their clients get what they pay for. They don’t get what I give, the support, the results and the 10+ years of experience and expertise. It would be a disservice to me and my clients to charge less than I do.

Make up your prices again, put it up again, what are you worth? There is a balance to this depending on the type of client you are aiming for. No business will survive or grow if the client base you are aiming for is too small or can’t afford the services you offer. Better to serve customers who can afford more, and use your overflow and abundance to do that pro-bono work for the goodness of it. That way you earn what you are worth, and you don’t resent working for free with people that may not even value you or see your worth.

Take this as your challenge, and make it a commitment, to increase your prices in the next four weeks if you haven’t increased them in the past year or more.

Inflation last year was 10%, meaning you are actually earning 10% less that you used to if your prices have stayed the same. Even baked beans have put their prices up, you deserve to as well, in fact, you must.

Practical ways to avoid tax headaches

Have a monthly process where you review your companies profit and loss position and put aside the money you think you will need tax. If you want to do what I do, go for 50% or even more.

Hire an accountant and bookkeeper now. Especially if it isn’t your strong suit. Check in with them more than once per year.

Don’t be afraid of VAT registration, embrace it and add it on top of your current pricing.

Review your pricing every year. Every year your experience and skills improve so you deserve to charge more. And inflation means if you don’t, you will be earning less.

Tax efficiency vs tax avoidance

I’m going to end with this, because I am all for tax efficiency but tax avoidance will see you taken to the principal’s office, and nobody wants that!

When we talk efficiency, we mean structure, systems and using the allowable expenses within your business to minimise your tax liability. These change all the time so make sure your accountant is up to date.

On the other hand, tax avoidance is a road to fines and prison. This is where you are doing things unethically, hiding money or profits and simply breaking the law. It’s understandable that business owners may have a temptation but it isn’t worth it.

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