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Why it's critical to make Self Assessment less taxing
4 min read
Feeling financially confident is energising. For sole traders and SMB owners, knowing you’ve organised your finances to work for you not only gives peace of mind but also the freedom that keeps you doing what you love, even better.
But keeping up with financial admin, including submitting your Self Assessment, can be a stressful and unwanted distraction. This explains why despite having up to 10 months’ notice to file your Self Assessment tax return, nearly half (46%) of owners are holding off filing until 2-3 months before the 31st January deadline. In fact, a quarter (25%) of the millions of small business owners across the country will file in the last month.
While a quarter (25%) of small businesses are staying on top of their taxes and filing their return within the first month, one in five (22%) say they have previously missed the deadline resulting in considerable fines. Worrying still, Self Assessment has taken a toll on mental health for nearly a third (30%) with more than a fifth (22%) saying it has affected their physical wellbeing.
In order to understand how Self Assessment, an annual feature on the financial calendar, has become so triggering, Intuit QuickBooks commissioned a unique experiment using biometric data to assess the physiological impact of Self Assessment.
How does Self Assessment impact your business?
59% of sole traders and small business owners report that the lead-up to Self Assessment has impacted their business. Almost one in five (19%) have had to cut staffing hours due to a lack of time to train employees, and the same number (a further 19%) had to turn away customers.
Perhaps the biggest cost is the passion for your craft – whether it be building websites, making jewellery or wiring homes – the very reason you started your own business in the first place. Here we’ve found that Self Assessment has even led over half (54%) of business owners to question whether they have what it takes to run a business.
We enlisted the support of Professor Chris Brauer of Goldsmiths University to understand, amongst other things, that feeling most of us get when an HMRC envelope comes through the door. The experiment revealed that Self Assessment is:
1.A hidden stress that significantly affects the wellbeing of SMB owners. Participants underestimated the impact on wellbeing with stress levels increasing by 56% on average and highs of 85% when recalling the Self Assessment experience.
2.On par with the most stressful life events. When participants compared the experience of filing their tax returns with other stressful life events, the response was either the same or even more intense.
3.Detrimental to productivity. The process of gathering the information and paperwork for completing Self Assessment increased stress levels by 60%. Anxiety is known to impact productivity and also distract from other aspects of their work.
4.Damaging business confidence and prone to avoidance. There was a 53% increase in stress when participants spoke about the process of Self Assessment, which can damage confidence and lead people to avoid completing it.
5.In need of more support from the tech and accounting community. While the thought of getting help from an accountant or using technology reduced stress, a perceived lack of clarity with the process still demanded more hands-on support.
How to prevent Self Assessment from impacting you
Being an entrepreneur or self-employed demands a lot of self-discipline, resilience, grit and determination. But you can’t manage stress and do things differently if you don’t understand the source. As well as the Biometric data, we assessed participants using the Big Five personality model prominent in neuroscience research. Here we found three typical Self Assessment personas. Which one are you?
1.Precarious Procrastinators: Need help with maintaining order, structure, and routine. Low self-esteem means that Self Assessment is something that leads them to procrastinate or delay the process.
2.Determined Doers: Also need help with order, structure and routine but high self-esteem means they are less frustrated by the Self Assessment process. They are also more readily motivated to complete it.
3.Confident Completers: Well-versed in order, structure and routine. High self-esteem means they will be more comfortable and confident in the outcome, so long as the process is clear.
Different people will experience and act on Self Assessment differently, but the process need not adversely impact your health and performance. In order to reduce the triggering nature of tax returns, we’ve developed a useful tool and resource to determine your readiness for Self Assessment:
Together, let’s business differently and make Self Assessment less taxing!
Found this article about Self Assessment useful? Using software like QuickBooks is a great way to make sure you stay on top of your taxes.