With the end of the tax year coming up, now is a good time to think about your earnings for this year and tax planning strategies. Whether you’re a sole trader or a company director, there are some key things to consider to ensure that you’re tax optimised for the year!
- Do you know your total turnover for this year? How does this relate to the VAT threshold of £81,000? If you’re getting close to this and you don’t want to VAT-register, you may wish to slow trade down a bit or defer jobs to ensure that you don’t have to register. Remember, the threshold works on a 12-month rolling period so it’s important to keep track of turnover regularly to make sure you don’t breach this without knowing.
- Should you voluntarily register for VAT? If your customers are mainly VAT-registered, there can be significant financial advantages in registering for VAT – especially by using the flat rates scheme.
- Does your business need any new equipment? If so, buying before the end of the tax year will reduce your tax bill in January so consider bringing forward any planned purchases.
- Consider the timing of any work: if you have any big projects on the horizon, you may want to delay delivery until after the start of the new tax year. This will give you an extra 12 months before you have to pay tax.
- Do you have an idea of your level of profit for the year? If your profit is in excess of £20k, it may be time to think about registering as a limited company.
- Does your profit look set to exceed £41,865? If so, you may wish to consider making a pension contribution or a gift to charity to reduce your tax bill.
- Early bird discount: we are pleased to repeat our early bird offer this year. If you get your records to us before the end of April, you will qualify for our early bird discount of 10%!
- Dividends: you should look to maximise the dividend you take from the company this personal tax year to increase your total earnings up to the £41,865 threshold. For a dividend to be legal, it needs to be done in consideration of the accounts of the business after setting aside sufficient money for tax. It should also be done with thought as to maintaining the net assets position of the balance sheet to protect the credit rating of the company.
- If you have exceeded the basic rate threshold with dividends and other income, you may want to consider a gift to charity or pension contributions to bring down your tax bill.
- In addition, if you still have remaining surplus funds within the company, you may want to consider making an employer’s pension contribution to extract more money from your company tax-free and reduce your corporation tax bill in the process.
- We also recommend that you talk to your IFA to ensure that you have taken advantage of other tax-saving mechanisms, such as ISAs. Remember, IFAs are busy at this time of year so it helps to get in touch early!