Every year HMRC make certain tax reliefs and other benefits available. We have put together a handy check list to help you plan for your year end and to help you put things in place to make life easier for the coming financial year.
End of your current year
Capital Gains: Have you used your annual exemption for 2019-20 of £12,000?
Entrepreneurs’ Relief: Have you made the most of the £1 million lifetime limit?
Corporation tax: Currently 19% is due on all profits of the business before you can pay dividends.
Dividend Allowance: Have you utilised the 0% Dividend Tax Band of £2,000 (only available after corporation tax is paid)?
Bonus payment: Paying bonuses within the current tax year might reduce your profit and give your staff a lift. Equally, you might consider deferring dividends for those who receive low
Capital Allowances: Have you bought anything that you use solely for your business? A new laptop? Camera equipment? Microphones? Etc.. If you are thinking about making big purchases, it would be wise to do this with residual profit before your year end to reduce your Corporation Tax liability.
Research & Development tax credits: R&D is valuable to SMEs as these credits allow businesses to deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction.
Inheritance tax: Each year you have a gift allowance that you can utilise to minimise your family’s exposure to inheritance tax. Maximising this allowance can save thousands of pounds in tax in the long run.
Incorporation: If you are trading as a sole trader, partnership or Limited Liability Partnership perhaps incorporating as a Limited Company might be a more tax-efficient business structure. The beginning of the fiscal year is a great time to consider this.
Plan for the coming Year
Accounting dates: You can choose your accounting year end date. It may be more beneficial for you to align it with the end of the fiscal year or the end of the calendar year. Many businesses align the end of their accounting year with their internal holiday year to make internal administration easier.
Salaries: Consider payment of salaries to owner managers at tax-efficient levels following the reduction of the Dividend Tax Band.
Exchange your salary for benefits: Consider exchanging part of your salary for payments into an approved share scheme or additional pension contributions, to take you below the £100,000 threshold.
As always, if you have any questions about finalising your accounting year, running payroll or wealth management, get in touch with a member of our team. We are friendly and easy to talk to, and we don’t charge for an initial chat.