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The Importance of Tax Planning - A Guide to end of year tax planning

If you're a business owner, you're probably constantly on the move – from one meeting to another, managing suppliers and customers, and overseeing your staff. Before you know it, you're racing towards the end of another financial year.

However, it's crucial to take a step back a couple of months (if possible) before you reach your financial year-end. With a bit of forward planning, you can make sure there's more money available for both you and your business.

Here are some straightforward year-end planning tips:

1. Bring Forward Expenditure: Any expenses you incur before your year-end can reduce your tax liability for the current year rather than the next. By moving up expenses, even if it's just by a few weeks – for example, building repairs, advertising, or that marketing campaign you've been delaying – you can speed up tax relief by a whole year.

2. Maximise Capital Allowances: If you're purchasing business assets such as vans, IT equipment, or office furniture (excluding cars), you can claim a full 100% deduction you can claim a full 100% deduction of up to a specified limit against your profits. If you're planning significant spending in these areas, consider doing it before your business year-end. Keep an eye out for any changes in the allowance rate, as they can impact your tax planning. Before doing so, please contact us or your accountant about how much you can resposibly spend.

3. Consider Bonuses: If you decide to reward your staff (or yourself) with a bonus payment, you can account for the cost in your taxable profits for the year, even if the actual payment is made up to nine months after the year-end.

4. Make Pension Contributions: Contributing to pension schemes for directors or employees before your business year-end can reduce taxable profits. This also offers income tax and National Insurance savings, providing an alternative to traditional bonus payments.

5. Review Your Remuneration Package: If you're a limited company shareholder, think about replacing a year-end bonus with a dividend. Dividends, while not tax-deductible for the company, can result in National Insurance savings and lower income tax rates on dividend income.

6. Don't Overlook Admin: Be aware of your year-end date, which may vary for limited companies. Your corporation tax return and any tax payments are usually due nine months and one day after the year-end. As a director/shareholder of a limited company, you'll likely need to complete both personal and company tax returns. Staying on top of these deadlines can prevent unnecessary penalties and interest charges.

These are simple planning strategies that, with a little forward thinking and a break from the daily hustle and bustle, can genuinely impact your tax bill and cash flow. No need for complex transactions—just effective financial management.

If you would like to speak to an expert on this for additional advice, contact or 0141 266 0563.


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