This month, Jack Posner (principal) and Darren Stone (manager) of Leon and Company Chartered Accountants in Leeds write about the upcoming tax year-end and how you can plan for it.
The tax year-end is fast approaching and it won’t be long until we start asking our clients to start collating their business records. However, before we reach that all-important year-end of 5th April, we thought we’d share with you three tax-planning tips to help you on your way:
If you are in business and you have an approaching year-end then now is an excellent time to review any significant purchases on the horizon. Businesses enjoy 100% tax relief on all ‘qualifying’ business expenditure, and for capital expenditure (e.g. plant, fixtures and equipment), there is an Annual Investment Allowance of up to £200,000 per year – this means if your business is going to return a profit, then you can reduce your tax liability by claiming these allowances. So, it may make sense to buy that much-needed laptop or machine before the end of the tax year, thus reducing your tax liability much sooner.
For those of you that trade using a limited company, but have a year-end after 5th April, you may wish to review your company’s profits to see whether you can vote an interim dividend. This is particularly useful if you have any unused dividend allowance (which is £5,000 per taxpayer) or even unclaimed personal allowances, at 5th April 2017. Or are you a basic-rate taxpayer for the year? If so, you could vote part of an annual dividend before the year-end, and benefit from paying the lower 7.5% basic-rate of tax on dividends, rather than 32.5% for higher rate tax payers. This tax planning can be extremely effective, but we would always suggest you talk with your accountant before making decisions.
Giving to charity
For higher rate taxpayers, a well-timed charitable donation made under gift-aid can result in significant benefits for both the donor and also the charity. Such gifts made before 5th April will attract a nice tax break in the current year, and not to forget, it also helps us feel like we’re doing our bit too!