The vast majority of companies – around a quarter – choose March as their year-end, tying in nicely with the end of the financial year.
So, now we are mid-March, this is the perfect time for those business owners to do their year-end tax planning.
Here is our checklist of tax planning actions directors need to take:
If you are making a company pension contribution, remember to do so before the year-end to benefit from tax relief.
2. Invest in equipment
If you are planning to buy new equipment then do so before the end of the financial year, so you can benefit from the Annual Investment Allowance (up to £1 million per year). The AIA allows you to deduct 100% of the cost of qualifying plant and machinery from your profits in the year you buy them.
Qualifying equipment typically includes office furniture and equipment (computers, printers), machinery and tools, vehicles (cars, vans, lorries), and integral features of a building (lifts, heating systems, air conditioning).
3. Declare dividends
It is vital to reconcile your drawings against company profits and declare dividends before the year-end. This ensures your directors’ loan account remains in credit, so avoiding the punitive 33.75% Section 455 tax charge on overdrawn directors’ loan accounts.
4. Organise necessary maintenance and servicing
If there is maintenance needed on the building, or servicing planned for kit or vehicles, have the work undertaken before year-end, so the costs are in the current year’s account, to benefit from the tax relief more quickly.
5. Plan, plan, plan
As we approach the start of the new financial year, now is the time to plan. We have some great resources on this topic to help you. Check out this episode of Optimum Live. on ‘Knowing Your Business’ and this on ‘Busting Myths Around Business Plans’.
As ever, the tax team at Optimum are here to help company owners and directors with all things tax related. Please get in touch.
