In the business cycle, this is a key time for planning ahead – not just around how your business is faring, but also about how much tax you may be liable for, and looking at possible ways of reducing that tax liability.
Many tax bills will have recently been settled: self-employed will have paid their self-assessment personal tax bills, and limited companies with a March year-end will have paid their Corporation Tax liabilities. As we’re now rapidly approaching the end of another tax year at the end of March, it’s a good time to turn attention to the current year.
Has this year been a better year than last? If so, how much better? Has this generated more profit than previously – or has your business growth reduced your profitability?
The key reason behind these questions is to determine just how much tax you will have to pay on your profits. Your accountant will be able to help identify how much the bill will be. The key question that you will inevitably ask your accountant is how your business can reduce that tax liability.
Whilst each business is different and the solutions will also differ, we would start by looking at the following areas, as they will have an impact on your final Corporation Tax bill:
- Business assets: does your fleet need updating? Do you need any new machines or such like? Do your premises require any repairs or updates?
- IT: is there a benefit to investing in upgrades to your hardware? Is your business software up to date? Might it be worth trying some different software?
- Training: do your staff need training to enhance their skills?
- Pay rates: is it time for a review or does anyone deserve a bonus? Paying any additional amounts before the end of the year will also help lower your taxable profit. Bear in mind the new rates of minimum pay to be introduced over the next few years.
Spending on any of the above before your end of year is vital to give you the tax relief now. Waiting until your new tax year would delay the tax relief for another twelve months. Obviously, any developments require you to spend and use business cash flow, but they will save tax, enhance the business, and hopefully improve the business performance for the next year.
If you are interested in a review to see if there is anything that can be done now to minimise your next Corporation Tax bill, give us a call or email Nickie email@example.com