Tax: Year-end considerations

Tax Planning
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There are always competing factors to consider when thinking about your March year-end as a company:

  • Have you had a successful year and wish to reduce your tax?
  • Are there cashflow pressures to think about?

In addition, this year there are also upcoming tax rate changes to consider, that may mean you wish to make decisions around March/April too. Corporation tax is changing from 19% to a rate between 19-25% (depending on your level of profit). See here for our article about this.

Things to think about…

Expenditure to reduce the tax charge for March year-ends:

  • Consider making a March director pension contribution, though it is important to seek independent financial advice before you do so.
  • If you have Annual Investment Allowance to spend, use it on an asset purchase in March (laptop, van etc.). An added bonus to these purchases is potentially benefiting from the pre-April asset super deduction rate. See our article here about the changes.
  • Look diligently for accruals that may exist before April. Accruals are items of expenditure that relate to the year, but are invoiced after the year-end.
  • The rates of R&D tax credits are changing, so arrange any eligible R&D spend accordingly before April.

Push back expenditure to help reduce the impact of tax rate increases:

  • As corporation tax rates are increasing, pushing back expenditure into April would be a useful way to reduce your overall amount of tax paid.
  • The first-year allowances (FYA) are changing from April for specific expenditure; see our budget guide for the information here. Entities with large asset spends may benefit from using the new FYA rates.

Other useful things to consider before the personal tax year-end:

  • Decide what dividend to declare in the year. It is always good to declare dividends as you go and now would be a good time to determine what dividends you wish to declare. Think about how this interacts with:
    • your reserves, don’t declare dividends for more than the reserves that you have
    • your directors’ loan accounts, ensure that the dividend is sufficient to keep the DLA accounts in credit
    • your personal tax position: picking the right level of dividend may help you avoid paying tax at a higher rate or needing to pay back child benefit
  • Ensure that the salary you are paying yourself, as a director, is efficient for the new tax year.
  • Gather information for business mileage that you haven’t claimed, to utilise your tax return.
  • Consider smaller items like trivial benefits (up to £300 for a director, £50 for an employee), use of home allowance, business phone etc.

As always, if you are thinking about significant items of income, expenditure or asset purchasing near your year-end, please get in touch with your key contact at Burton Sweet to ensure that you’re making the best possible decision.

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