When your year end is approaching it’s important to take the opportunity to think about any actions you need to take to manage your tax bill. Many of these actions actually need the transactions to be carried out before the end date and can’t be backdated.
Some of these actions have cash flow and balance sheet effects. Make sure you aren’t reducing your tax bill at the price of running out of cash or damaging your credit rating. If you need advice on these trade offs please don’t hesitate to contact us for advice.
Below we list a brief guide to the main areas that you should review:
It’s an obvious fact that the more expenses that are included in your Company Accounts the lower your Corporation Tax bill will be. Here are some common expenses that are missed:
Expenses paid for using personal money – make sure any business expenses paid for using personal cash are claimed back from your company. Every bit goes to saving tax so be sure to find any old receipts.
Motoring costs – If you are paying yourself mileage for using your own car for business mileage make sure it is all claimed.
Bring forward routine purchases – If you regularly purchase items such as office supplies bringing them forward can increase your expenses and reduce your tax bill.
Mobile Phone Bills – Consider transferring your mobile into the Company Name and paying for it directly from the Company. In this way all business and personal calls are allowable as an expense.
Annual Investment Allowance – Most Plant and Machinery purchases (not including cars) up to £1 million qualify for the Annual Investment Allowance which allows you to claim the full amount in tax relief immediately rather than spreading it over multiple years with Writing Down Allowances. So clearly if you are considering an asset purchase doing it before the end of the year will accelerate the tax relief. See the full rules here: https://www.gov.uk/capital-allowances/annual-investment-allowance
Salaries and Bonuses
Bonuses – If you are considering a bonus though additional salary payments for a Director or an Employee then this may be a good idea before the Company year end so the Corporation Tax Relief is received as soon as possible.
Family Members – If you have a spouse or family member who is doing work for the Company unpaid this might be a good time to consider putting them on the payroll and paying them for the work that they have done. Be careful to consider the effect of any bonus on Child Benefit payments as total salaries over £50,000 start reducing the Child Benefit received.
Contribution Date: For a pension contribution to be deductible from the year’s profit the actual payment must be made inside the Company Year. Remember that it is usually more tax efficient to pay pension contributions for Directors as Employer Pension Contributions. These are payments direct from the Company to the Pension Company which means there is no National Insurance involved. The limit for this payment is then £40,000 a year per person.
R&D Tax Claims
R&D Tax Relief: Many Companies don’t realise that they can claim R&D tax relief on work that they have been doing. It is worth getting a specialist Company to do a review to see if you qualify. These credits can be claimed up to 2 years after the Company Year end so it is important to do this review as soon as possible to protect previous years. Contact us to put you in touch with an expert https://www.sutherlandblack.co.uk/r-and-d-service/.
Don’t hesitate to get in contact if you would like advice on how to save tax in your Limited Company. Give us a call or drop us a message here: https://www.sutherlandblack.co.uk/contact/