University of Bath social psychologist advises how to build habits to avoid tax stress

London, UK - 14 December 2021

With new digital tax legislation coming into force in just four months, Intuit QuickBooks, the global technology platform, has found that almost 300,000 (297,000)¹ eligible small businesses not yet compliant with Making Tax Digital (MTD) are putting it off.  

From April 2022, VAT-registered businesses with a taxable turnover of less than £85,000 – the last group to require compliance – will have to keep digital records and use software to submit their VAT returns. 

The change is due to impact 1.1 million small businesses. But among the eligible small businesses surveyed by QuickBooks that are not yet compliant, 41% surveyed said they were delaying making the necessary changes.²  

It’s human nature to delay things we find stressful, and QuickBooks’ research shows small business owners find their VAT returns particularly taxing.  

On average, small business owners spend four hours a month worrying about their VAT returns – the equivalent of more than half a working day – and for one in five (20%) this rises to over 7 hours, or a whole working day. This has a huge impact on owners’ wellbeing, with a third (33%) of those experiencing stress around VAT returns, and even losing sleep over it.   

Time spent worrying about tax is preventing small businesses from reaching their full potential. Four in five (43%) small business owners say they could generate revenue more effectively if they weren’t spending time worrying about their VAT returns, while 41% say they could be more effectively growing their business.  

To help small business owners with this, QuickBooks has partnered with Bas Verplanken, Emeritus Professor of Social Psychology at the University of Bath. He has developed a guide for small business owners – based on the social psychology of effectively creating new habits - to help them keep on top of their VAT returns, minimise stress around compliance, and strengthen their business as a result. The guide can be accessed here.  

Bas Verplanken, Emeritus Professor of Social Psychology at the University of Bath, says: “Successful habits form when you frequently and regularly conduct a task and protect against forgetfulness, procrastination, and even fear by making your tasks part of your daily or weekly routines.

Building and adhering to these habits can minimise small businesses’ worries about their VAT returns and put them in full control of their business. Taking these steps will not only help them to adhere to the law, but also make them happier as a business owner.” 

Digital switch can help alleviate tax stress  

QuickBooks’ research also found that going digital will also ultimately help prevent the ongoing cycle of tax stress. In fact, the majority (58%) of small business owners agree that using digital software reduces or could reduce stress when filing VAT returns. 

The main benefits of using software to complete VAT returns are that it’s quicker (42% surveyed agree), more accurate (39%) and more efficient (38%) than using older methods like spreadsheets. It also makes it easier to keep up with regulatory changes (34%).  

Pauline Green, Head of Product Compliance & Programs at QuickBooks, says: 

“Tax returns are a necessary fact of life for most small businesses, but that doesn’t mean they are enjoyable. With many experiencing sleepless nights around filing their returns, it’s understandable that many are avoiding thinking about upcoming VAT legislation.  

But it doesn’t have to be this way. Using digital software for VAT can actually reduce stress by automating the process, therefore minimising the time spent, improving efficiency and ensuring returns are accurate. Software also provides real-time insights into finances, helping to build better habits and financial awareness. If they prioritise becoming MTD compliant, small businesses will start to experience these benefits and eliminate tax worries – allowing them to focus on building a successful business."

Sources

¹HMRC estimates 1.1 million businesses are eligible for MTD in April 2022. QuickBooks’ research shows amongst all eligible businesses, 27% are putting off becoming compliant – equivalent to 297,000 small businesses. The proportion of those not yet compliant who are putting it off is 41%.  

²Independent research conducted by Censuswide on behalf of Intuit QuickBooks with a representative sample of 1,007 small business owners whose businesses are VAT-registered, with an annual turnover of less than £85k. In field between 1 – 11 November 2021.  

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