Starting a business is exciting.
You’re finally turning your ideas into something real. But amid all the buzz, setting up your website, getting your first few customers, or figuring out what to charge, it’s easy to overlook one important thing: your taxes.
Most UK startups end up overpaying business taxes in their first year.
It’s not because they want to. It’s because they don’t know any better.
Red Fish Accountancy helps new business owners spot the tax mistakes they don’t even know they’re making, especially in their first year. If you’re handling everything on your own, it’s easy to miss key savings.
Starting, most business owners don’t know what counts as a tax-deductible expense or how to report things the right way. That’s where the problems begin.
Here are the most common reasons new businesses overpay business taxes in their first year:
Many startups forget to claim everyday business costs like:
According to HMRC, if an expense is "wholly and exclusively" for business, you can usually claim it.
But many founders don’t know this, or don’t keep proper records, so they end up paying tax on income they didn’t need to.
Some startups rush into registering for VAT without realising it may not be needed, especially if their revenue is still under the £90,000 VAT threshold.
Charging VAT too soon can:
Unless you’re sure VAT is right for your business model, waiting can be the smarter move.
New business owners often pay themselves incorrectly, either too much through salary or not enough through dividends, if set up as a limited company.
This leads to unnecessary National Insurance and income tax.
With the right setup, you could save hundreds (or more) by balancing salary and dividends properly.
Late filings mean automatic fines, even if you owe nothing.
Based on GOV.UK data, more than 300,000 people missed the 2023 self-assessment deadline, leading to £100 penalties:
Startups with no systems in place often forget these deadlines, which means more cash goes to HMRC unnecessarily.
Trying to handle tax without help? That’s where it often goes wrong.
You might:
And in all those cases, you end up overpaying business taxes without even realising it.
Now let’s talk about how to stop leaving money on the table.
You can’t claim what you can’t prove. Use an app or spreadsheet to track:
This way, when it’s tax time, you’ve got everything ready.
Startups can claim more than they think. Things like:
A guide by Simply Business gives a clear breakdown of deductible startup costs.
Are you better off as a sole trader or a limited company? Each comes with different tax rules.
Making the right choice early on can mean:
Not sure which to pick? That’s where expert advice can help.
This is the big one. A good accountant isn’t just for crunching numbers. They:
At Red Fish Accountancy, we specialise in supporting UK startups. We know what new businesses face in their first year, and we know how to keep taxes fair, and not a penny more than needed.
Overpaying business taxes isn’t just about filing late or making math errors; it often starts with small things that build up over time.
If you're not careful, your first year in business can cost you more in tax than it should.
Here’s how you can protect your profits and avoid common tax mistakes, especially if you’re just starting:
The structure of your business affects how much tax you pay. Whether you're a sole trader or a limited company, each comes with different tax rules, allowances, and obligations.
Red Fish Accountancy can help you review your setup early and choose the best route based on your income, growth goals, and personal finances.
Keeping accurate records from the start makes a huge difference come tax season. You’ll be able to:
Use simple tools like spreadsheets or accounting software like Xero, FreeAgent, or QuickBooks, many of which are HMRC-recognised for Making Tax Digital (MTD).
Red Fish Accountancy supports startups in choosing tools that match their needs and offers guidance on setting up reliable, easy-to-use tracking systems.
Many business owners wait until January to sort their taxes, but by then, it’s often too late to fix anything. The earlier you speak to an accountant, the more you can save.
According to a 2023 report by the Federation of Small Businesses (FSB), poor tax planning is one of the top reasons small businesses struggle financially during their first year.
Red Fish Accountancy offers tailored advice to startups throughout the year, not just during tax season, so you can avoid surprises and stay in control.
Good news: It’s not too late.
If you’ve overpaid in a previous year, you can claim a refund, usually up to four years back. You’ll need:
A study from UHY Hacker Young reported that UK taxpayers reclaimed over £300 million in overpaid taxes in a single year. That’s a lot of startups finally getting what’s theirs.
The truth is, you don’t need to wait until your business is booming to get professional help.
The earlier you bring in an accountant, the better your chances of avoiding costly mistakes, especially around tax.
Many new business owners think they can manage everything alone at first.
And while that’s understandable, it can quickly lead to errors that cost you hundreds or even thousands in overpaid tax, penalties, or missed deductions.
Here are clear signs it’s time to get help from a professional:
Even one sale means you’ve started trading, and HMRC will expect accurate reporting. An accountant can help you:
Claiming allowable expenses is one of the best ways to avoid overpaying business taxes, but many startup owners don’t know what counts.
An accountant can explain what’s claimable, including:
Knowing what’s allowed means you won’t miss out on deductions that reduce your tax bill.
Missing tax deadlines means automatic penalties, even if you owe nothing.
An accountant can:
According to GOV.UK, a missed self-assessment tax return triggers a £100 fine right away, with more added the longer it’s late.
Forming a limited company can offer tax advantages, but it also brings more admin and responsibilities. Before you leap, an accountant can help you weigh up:
Hiring help early on can stop small issues from becoming big, expensive ones. It also means less stress and more time spent growing your business.
Running a business is tough enough.
You don’t need to make it harder by overpaying business taxes, especially when that money could go back into your product, your team, or your next big idea.
At Red Fish Accountancy, we believe every startup deserves a strong start.
We’re here to help you save money, stay compliant, and feel confident about your numbers, so you can focus on growing what you love.
Explore how we can help here.
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