These days it’s very important to plan ahead when your year-end comes around. Many opportunities for tax planning simply disappear once the year end date slips by. We’ve set out below the important areas for consideration below along with the reasons why, we call this our get ahead checklist. We suggest you review it carefully and make sure you’re not missing out. Of course we’d be delighted to help – just call.
| Consideration | Why? |
|---|---|
| Excess profits | |
| If you make lots of profits then you end up with a large tax bill.....right? Not necessarily! | We have a number of tax strategies that we can apply to your business to substantially reduce your tax liability. |
| Directors Loan Account | |
| Like most business owners you’ve made drawings from the business during the year in addition to your salary and normal dividends. We suggest a review of the Directors’ Loan Accounts to calculate whether you need to vote dividends, bonuses or other extraction strategies. | If nothing is done there is a danger that unnecessary tax or national insurance is paid. |
| Pensions | |
| Pensions can be a very tax efficient way of saving, but it’s important to get the paperwork and the timing correct. | In order to make the available tax relief claim the pension contributions need to have been paid over to the pension scheme by the year end. |
| Bonuses | |
| In certain circumstances bonuses can be a tax efficient way of extracting profits, they can also be used to motivate key staff members. Again, the key is to ensure that all the paperwork is in order. | HMRC won’t allow the deduction of a bonus for tax purposes unless it can be shown that it was committed to before the year end. |
| Pre-year end spending | |
| If you’re thinking of investing in any fixed assets [like vehicles, computers, plant and equipment etc.] in the next few months, it may be appropriate to do this just before the year end rather than just after it. | You should end up getting the tax relief on the investment a full year earlier, and in the case of some assets where there is a disposal, you may be able to claim the loss on disposal earlier too. |
| If there are any other items of expenditure where the timing is under your control, such as marketing, maintenance or training, then once again it is more sensible to spend before the year end rather than just after. | As the expenditure falls into the current year, relief is available in that year. |
| Dividend Planning | |
| Dividends are still a very effective tax planning tool, but if they are to be used the paperwork needs to be prepared on time. | There is now no such thing as ‘proposed dividends’ they are either paid or not. If they are paid then they are included in the accounts and tax returns on the date paid. HMRC are very careful to consider the timing of paperwork for dividends these days |
| Don’t miss out on using your basic rate band when it comes to voting dividends, this allows amounts to drawn from the company on a tax free basis. | Everyone can earn dividends up to their basic rate band without any further tax to pay, and you get the allowance every year - don’t miss out on yours! |
