With the end of the tax year fast approaching, what can you do to save any last minute business tax?
This will apply to you if you’re a limited company coming up to your year end of 31 March 2022, or if you’re a sole trader or partnership business coming up to the end of your self-assessment year of 5 April 2022.
If you’re looking for top tips on reducing your personal tax before the end of the tax year, check out our separate blog:
If you’ve been working with us through your business year, we will have been giving you tips to reduce your tax as we’ve journeyed through the year. While working on your quarterly VAT returns, we will also have given you an idea of how much corporation tax to set aside.
So here are our 5 top tips to reduce your business profits and your business tax:
1. Purchase any assets or equipment you had planned before your year end
If you were planning on buying that new van, or piece of machinery in the next couple of months, then do so before your year end, otherwise you’ll have to wait til the end of your next year to take advantage of any tax savings.
Also consider the new Super Deductions which came into effect 1 April 2021 for limited companies.
For eligible asset purchases, you get an extra 30% deducted from your profits, before working out your tax.
2. Consider buying an electric vehicle through your business!
The rules changed massively on the tax treatment of electric cars from 6 April 2020, and we’ve already helped clients to purchase Teslas and electric Minis!
Check out our blog should you buy an electric car through your business for more info.
3. Consider pension contributions
If you’re a director of your limited company then your company can pay into your pension and gain tax relief.
In theory you can contribute up to £40,000 each year, which is a corporation tax saving of £7,600 in the current tax year.
You may even have previous years’ limits to use up.
Beware though, you definitely need to speak to your financial advisor for advice specific to your personal situation.
Or get in touch with our IFA Kevin Morris Dip FA, we’ve worked together to save many of our clients corporation and personal tax.
4. Check you’re using your personal allowances
If you’re a director and/or shareholder of your limited company, make sure that you are taking enough income out of your company to make full use of your personal allowances.
We generally advise taking a low salary to use up your personal allowances via PAYE, and then extract any available profits via dividends.
However, this is entirely specific to your personal circumstances, so we would always recommend seeking advice before making any decision.
We can’t stress enough that the above advice is very generalised, and subject to prevailing HMRC rates and allowances. Always speak to us or your accountant/financial advisor before making any big financial decisions.
In the meantime, if you think you may not be able to afford your tax bill, please check out our blog I can’t afford to pay my tax bill, what do I do?
Thank you for reading
Kinder Pocock are an approachable cloud-savvy firm of accountants based in Herefordshire but supporting businesses on the move.
We specialise in Security/Technology, Design and Indie Hospitality businesses.
Contact Us to see how we can help