There are many risks that you should be aware of when calculating your business profits. HMRC have a toolkit that is available to follow to prevent any errors on tax returns. You can read below to follow our useful guide to help you input your business profits.

Record Keeping

You should make sure that you keep on top of your business records so that your profits are correct.

If you do not keep records of your expenditure, then your sales and expenses will not be reflected correctly in the accounts.

Business Income

The profit and loss from your business will only be correct if your income is included within the accounts.

If your business is unincorporated and has chosen to use the cash basis, then the business income must be included on an accrual’s basis, to match the period it was earned.

Make sure you report cash sales, barter arrangements, scrap sales and contra sales within your accounts.


Review all your purchases and expenses to make sure that they are included in your tax return so that your reported profit is correct.

If a deduction is made it is only allowable for expenses that are wholly and exclusively incurred for the purposes of the business.

If you are a sole trader or a partnership, then you do not have to claim actual expenses as you can use simplified expenses.

Stock and work in progress

If your business holds stock, it is important that you do not overlook or value it incorrectly as this will create errors.

Work-in-progress is quite complexed, so it may be worth getting some advice to ensure it is correct.

Miscellaneous items

There are miscellaneous areas that should be considered to review post-balance sheet events and consideration as to whether any adjustment to the account is needed.

Staff costs must also be reviewed as amounts unpaid nine months after the end of the period should be added back to the tax return.

Directors loan accounts should be given on the date the amounts are credited.

Further Actions

When submitting your businesses profits into a tax return, make sure that you use this handy guide to avoid making any mistakes so that your tax return will be as accurate as possible.

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