Pre Year End Tax Planning Tips

pre year end tax planning

Here are some pre year end tax planning tips to implement prior to year end to help reduce your corporation tax bill.  Hopefully you’re reading this around 2-3 months prior to your year end, to ensure plenty of time to put these tips into action (although some of these can be done last minute – but the sooner you plan for these the better!).

And just to throw in a caveat – this is generic advice/tips and may not be relevant to your specific circumstances.  So please do get some specific guidance to ensure you are doing the right thing for you and your business. 

  1. Spending – It’s not very often we’d recommend going on a spending spree, but if you’re looking to upgrade or buy additional assets then now is the time!  Things like vehicles (especially electric – check out Vikki’s blog on electric cars), computers, or any other equipment you may need for your business.  Make before year end rather than just after and start getting tax relief sooner.  Any other expenses where timing is under your control – ie maintenance, marketing, training and so on we’d also recommend doing before year end.  However, tax is only part of the story – make sure your purchases are financially and commercially viable before spending!  Don’t just spend for spending sake!
  2. Pensions – You may be making contributions during the year, but if you have some spare cash making an additional lump sum contribution will reduce corporation tax and help your pension to grow income tax and capital gains tax free.  Win, win.  Again, it’s very tempting to throw a nice lump sum in, but make sure it’s within the allowable threshold, and doesn’t mean you’re then low on cash reserves which could cause other issues in the coming months.
  3. R&D – If your business carries out research and/or development of new products or services you could be entitled to R&D credits.  The rules around R&D are quite complex so if you think what you’re working on could mean you’re entitled to these credits please do have a chat with us – and in this case actually the sooner the better.  At the start of your R&D project planning would be the best time to ensure you’re structured in the correct way – especially if the majority of the cost is your own time/salary!!, however, the second best time is asap!
  4. Bonuses and dividends – If you’re looking to reward staff with year end bonuses, then actually before your year ends is the perfect time to ensure maximum tax efficiency.  Also if profits are high it may be worth voting a higher dividend, or bringing one forward – especially if tax rates are due to change and personal tax could be at a higher rate.
  5. Are you looking to sell/reduce your own involvement in the next 3 years?  Very often to ensure tax reductions you need to ensure business is structured in the correct way.  The best time to do this is prior to year end, and definitely requires a chat with your accountant to ensure you have the right structure to give you the right exit strategy.

I hope these tips help and give you some clarity on ways to be more tax efficient.  With tips 1 & 2 also remember to ensure you don’t spend too much, and that you have enough profit after tax to pay the dividends you require.!  

Any questions please don’t hesitate to contact one of the team.  If you’re an existing clients we’ll be in touch around 3 months prior to year end to book in your annual review and tax planning session.

Not yet a client?  Let’s explore working together by completing our quick questionnaire and booking a discovery call.  We look forward to speaking with you.