08 Feb Just 2 Months To Go! Year End Tax Planning for Small Businesses
It must feel like no sooner have you paid the last tax bill, there is now talk of more tax. Indeed, this is the case, as the current tax year is coming to close again on 5 April 2017, which means there is less than two months to take any important action that could reduce your next tax bill.
Just 2 months to take action
Come the 6th April 2017, there is very little that can be done to affect your 16/17 tax bill, which will be due for payment in January 2018. The income you have earned will be taxed, and the relevant business costs you have incurred will recieve tax relief.
This is why it is so important to use these next couple of months to do what you can to save even more tax this year and keep extra pounds and pennies in your own bank account.
Tax planning for small businesses
Small business owners are always keen to save as much tax as possible. Each year there is a list of standard things to consider, that apply to almost all small business owner.
However, like with most things financial, getting bespoke tax planning advice will enable other variables to be considered, and to ensure there is no stone left unturned for your individual situation.
8 standard tax planning tips to consider:
- Know exactly what you can claim tax relief for. Claiming the maximum business expenses allowable against your business income, reduces taxable profits and keeps your business tax as low as possible
- Time larger projects. Also, if you are planning any larger-than-usual business projects, say designing & printing a new brochure or creating a new website, then careful timing could allow these costs to be written-off for tax relief in this current tax year, if you act quickly.
- Plan capital expenditure. Similarly, if you need new equipment or furniture & fittings for your business, it may be wise to time the purchase before the end of the tax year. This way you can claim the Annual Investment Allowance in this tax year, rather than waiting a whole year if you purchase in April or May, for example.
- Utilise all relevant tax allowances. This may include assessing the tax situation of your spouse or civil partner also, as some allowances are transferrable, or can be shared.
- Pay into a pension. Payments into a private pension plan extend the basic rate tax band by the same amount. Therefore, this can be a great way to pay less tax, whilst saving for your retirement. Particularly useful if you are nearing the higher rate tax threshold this year. Action does need to be taken before the year-end though.
- Save into an ISA. Even though ISA interest rates are low at the moment, it is still a tax-efficient way to save, as interest isn’t subject to tax, as it is in regular savings accounts.
- Consider your business structure. There are tax benefits to operating through a limited company, once your profits reach a certain level. An accountant can do a comparion of sole trader versus limited company to see if savings could be made either before the end of the tax year, or for the future.
- Claim maximum expenses on your rental property. In the same way as your business, if you are also a landlord, ensure you are claiming all relevant property expenses to reduce your rental profits.
More complex areas of tax planning can be explored with a specialist accountant that understands how small businesses can save tax.