As the year comes to an end, businesses across the UK need to take some time to plan for their taxes. This is essential because planning ahead can save you money and ensure you’re complying with the latest tax laws. In this guide, we’ll go over everything you need to know about end-of-year tax planning. Whether you are a small business owner or run a larger company, this guide will help you navigate the process with ease.
Why Do British Companies Need Year-End Tax Planning?
Year-end tax planning is highly important to any business. It will save you money and surprise you if you plan. Tax planning puts your company under all the tax regulations and deadlines.
Tax planning in a good way, you will be in a position to lower your tax rate. You can claim tax concessions, deductions, and credits that will benefit your business.
Key Deadlines to Remember
There are a few important tax deadlines your UK companies need to comply with. Missing one attracts a penalty. Knowing these deadlines will enable your company to remain on course and commit fewer errors. The following dates are the most important ones to note:
-
Corporation Tax
Most companies must complete their corporation tax return within 12 months of the accounting date. It is advisable to file earlier, however, to avoid late-filing penalties.
You have to pay corporation tax 9 months and 1 day after the accounting date close. Ensure that you have sufficient cash to pay on time.
-
Value Added Tax (VAT)
If you are registered for VAT, you need to pay it and send your VAT return within 1 month and 7 days after your VAT period ends.
Checking your VAT records often will help you avoid mistakes, extra payments, or fines.
-
PAYE and National Insurance
If you have employees, you will also have to pay their PAYE tax along with their payment. Either monthly or quarterly, as your business may be of a regular or irregular type, you will have to do it.
Once the tax year is over, you will be required to give a P60 to each of your employees. This notifies them of the amount of money they have made and how much tax they paid throughout the year.
-
Self-Assessment Tax Return
As a business partner or sole trader, you should file your self-assessment tax return when the tax year is over (April 6 to April 5) by January 31. Send it early, and no penalty will be applied.
Simple End-of-Year Tax Planning Suggestions
Tax planning is just being clever at what you do so that you keep as much of your money as you can away from the taxman. Just apply these easy guidelines to get ahead:
-
Check your Profit and Loss Accounts
Preparing your year-end profit and loss (P&L) statement will reveal to you what you’ve spent and made. It will inform you when to incur costs in advance and whether you should or not put some spending aside for later.
-
Make the most of Capital Allowances
Capital allowances are a tax relief for businesses that buy things like machinery, computers, and vehicles. These purchases can help reduce your tax bill. If your business bought any of these items this year, make sure to claim capital allowances on them. If you’re planning to buy something big, consider doing it before the year ends.
-
Pay Yourself a Salary
As a director or business owner, taking a salary from your business is a very good method for maintaining low tax for your business. Ensure that you take a proportionate to the profit of the business and the work put in. Pay attention to the fact that you will make PAYE and National Insurance contributions if your income is over the tax-free limit.
-
Pensions Contributions
Pension payments are another means of reducing your tax-deductible earnings. Your staff and you contribute to pensions and get tax relief as well. It will lower your corporation tax and save you for the future.
-
Claim All Business Expenses
Do not forget to claim back all your business costs. Off costs such as office stationery, business journeys, and advertising can all be claimed back on your profit. This will reduce your taxable profit, so keep a note of anything you buy for your business.
-
Claim back R&D Tax Credits
If your company is making investments in research and development (R&D), you typically have a right to claim R&D tax credits. Your tax liability decreases, or you are eligible for a cash refund. Particular companies qualify for R&D credits, so it is worthwhile exploring whether your company is among them.
-
Examine Your Stock and Inventory
Make sure you are doing a year-end stock and inventory reconciliation. You can offset it against your costs if you do have more stock than you need. It will lower your tax-primitive receipts. Make sure you’re keeping your records up to date on your stock so that you don’t get into trouble with HMRC.
Tax Legislation for Next Year
Tax law goes through changes with the passage of time, and since this is a fact, you ought to be aware of any changes that could affect your company. The change could be because of a rate difference, VAT law, or National Insurance contribution.
Noticing any revision in taxes could help you adjust your tax strategy. Discuss with your accountant any new laws that could affect your enterprise the following year.
How to Choose the Ideal Accountant
The ideal accountant is the key to year-end tax planning. The ideal accountant will save you dollars, avoid errors, and be current on tax law.
When choosing an accountant, select one who:
Knows your business and industry
Is familiar with accounting for firms of your size
Is providing you with quality tax planning advice
Is current on tax law changes
Is well respected by other clients
Frequently Asked Questions (FAQs)
-
What is end-of-year tax planning?
End-of-year tax planning is when your business prepares for the next year’s taxes. It is checking your accounts, optimising tax-saving opportunities, and monitoring all the deadlines.
-
How do I reduce my company’s tax bill?
You can lower your tax bill by including your company’s expenses and using tax reliefs like R&D tax relief.
-
Capital allowances: What are they?
Capital allowances enable businesses to get tax relief on capital items like equipment, machinery, and cars. It deducts taxable profits by including the value of those items as a deduction over a period of years.
-
How do I pay my corporation tax?
To report your corporation tax, you will have to complete the CT600 form through the HMRC’s Corporation Tax services online. You are supposed to do this within 12 months after the end of your accounting period.
-
Do I need to submit a VAT return?
If you are a registered VAT business, you will need to submit a VAT return to HMRC. It covers VAT charged and VAT on acquisitions incurred. You’ll need to submit it 1 month and 7 days after the VAT period ends.