Pre-Year End Tax Planning Checklist

02 April 2019

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Effective tax planning is a year round job but it is only at the end of tax year that you have all the information in place to complete the planning jigsaw.

Whilst we appreciate that it may feel as if you’ve only just submitted your tax return for 2017/18, the new tax year starts this week and planning ahead could be beneficial to both you and your business.

Our Bristol team of accountants and business advisors have pulled together a checklist of points that you might want to consider.

For ease we have split the list into those things that you should consider as a company and those things that you should consider personally. The first four items on the list have been marked as ‘Business Considerations’ with the other eight being ‘Individual Considerations’.

If you would like to discuss any of the points raised in more details please don’t hesitate to get in touch. FD Works are an experienced team of accountants and advisors based in Wick on the outskirts of Bristol.

Business Consideration

1. Making Tax Digital (for VAT)

The requirements will apply to VAT registered businesses and organisations with turnover above the VAT threshold of £85,000. VAT registered businesses with turnover below the VAT threshold can opt in to MTD and file their VAT returns using MTD compatible software but there is no obligation to do so.

VAT is the first stage of HMRC’s Making Tax Digital Programme. Other areas of MTD such as income tax and corporation tax, have been put on hold until April 2020 at the earliest.

Overview of Making Tax Digital >

Making Tax Digital (VAT) FAQ >

Business Consideration

2. R&D Tax Relief 

R&D Tax Relief is something that you may not have considered before but could really transform your business.

Research and development (R&D) tax credits are a Government incentive designed to reward UK companies for investing in innovation. R&D can take place in all sorts of business sectors and whilst there are very specific rules to what constitutes R&D you may be quite surprised with the breadth of different types of claim. With the new tax year coming up, it is important to see if you are eligible beforehand in case any reliefs can be applied.

Companies that spend money developing new products, processes or services; or enhancing existing ones, are eligible for R&D tax relief. If you’re spending money on your innovation, you can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction. Furthermore if you’re making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.

If this is something you would like to explore further our Bristol-based accountants can refer you to a firm of award-winning industry specialists that we partner with.

Business Consideration

3. Capital Expenditure 

Capital Expenditure is more relevant to your business year end as opposed to the tax year end but it is always worth considering as a way to reduce corporation tax in a particular accounting period.

If you are planning to make any large purchases such as equipment, furniture, fixtures and fittings, it is recommended that you do so by your businesses year end as this spend will be deductible against your profits. Depending on the nature of the allowances, the deduction may be up to 100%, providing full write-off against profits in the year of purchase.

Further details can be found here >

Business Consideration

4. Automatic Enrolment Workplace Pension Schemes

Automatic Enrolment Workplace Pension Schemes will see a change in contributions from 6 April 2019. Currently the minimum contribution that employees can put into their pension pot is 3% with a further 2% being contributed by you as employers. This is set to increase to a minimum contribution of 5% for employees with a further 3% being contributed by employers.

Further details can be found here >

Individual Consideration

5. Pension Tax Relief 

There are 3 ways to maximise the tax relief you get on pensions before the end of the tax year.

  1. Maximise your annual tax relief allowance

For each tax year, you can get tax relief on pension contributions up to 100% of your annual salary, up to a maximum of £40k. If you don’t earn any salary, the maximum contribution you can make is £3,600 gross.

If the latter applies to you and you would like to start taking a salary in 2019/20 in order to increase your tax relief allowance then please speak to your Account Manager about us setting up a payroll for you.

  1. Carry forward some of your annual allowance

If you’re set to exceed your annual pension contribution allowance for the current tax year, you may be able to use some unused allowance from a previous tax year.

You can carry forward allowances from the last three years, as long as you were a member of a registered pension scheme during those years. The annual earnings limit still applies, so even if you’ve carried over a previous year’s allowance, your pension contribution limit is still capped according to your annual earnings.

  1. Make contributions from your limited company

As you run your own company, you can choose to make employer contributions into your pension. Your pension provider won’t claim tax relief on these contributions, but employer pension contributions count as an allowable expense, so they can be offset against your corporation tax bill, as long as they abide by the rules for allowable expenses. With current corporate tax rates at 20%, if you make a £10,000 pension contribution, you save £2,000 in corporation tax.

Also, bear in mind that employers don’t have to pay National Insurance on pension contributions, so by contributing to your pension rather than paying the money as a salary, you can save 13.8% in National Insurance Contributions.

Individual Consideration

6. Maximise Your Personal Savings Allowance

In 2018-19 (as with 2017-18 and 2019-20), the first £1,000 of interest you receive from savings is tax-free if you are a basic-rate taxpayer. If you are a higher-rate taxpayer, the threshold is £500.

Only when your savings income exceeds the allowance is any tax is due on it. This will no longer be deducted at source – if tax is due, you can pay it via self-assessment or have it deducted via PAYE through an adjustment in your tax code.

There’s no savings allowance if you’re an additional-rate (45%) taxpayer.

Individual Consideration

7. Use the £5,000 Starting Rate Limit for Savings

If your income from your job or pension is below the £11,850 personal allowance for 2018-2019 (£12,500 in 2019-20), but you earn income through interest on savings, you can qualify for the savings allowance.

Interest of up to £5,000 is paid free of income tax in addition to your personal savings allowance, meaning you could earn as much as £17,850 before paying tax this year, or £18,500 in 2019-20.

Individual Consideration

8. ISA Allowances 

Isa allowances have not changed so for both the 2018-19 and 2019-20 tax years, the annual limit is £20,000. However as this is a tax-free allowance it is a good option for those that have saving that exceed the savings allowances above. This can all be put in a cash Isa, all in a stocks and shares Isa, or split between both cash and stocks and shares.

Individual Consideration

9. Marriage Allowances 

From 6 April 2017, married couples and civil partners can transfer £1,190 of personal allowance from the lower-earning partner to the higher earner.

This is only available if the higher earner is a 20% taxpayer – no transfer is possible if they are a 40% taxpayer. Up to £1,250 can be transferred in 2019-20.

Further details can be found here >

Individual Consideration

10. Dividend Allowance

The dividend allowance is not changing for the new tax year 2019/20 and will remain at £2,000.

A reminder of previous year’s allowances is here >

Individual Consideration

11. Relevant Life Plans

If you’re considering buying a life insurance policy to protect you and your family, relevant life cover is a very tax efficient way of taking out cover via your own limited company. It allows companies to offer a death-in-service benefit to its employees (including salaried directors). It’s set up by the company and pays out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured. The proceeds go directly to the employee’s family or financial dependants.

Individual Consideration

12. Invest in a Business 

If you have excess cash, investing in small businesses can be a great way to do some good while limiting your tax on investment income. There are two HMRC schemes that investors can use to offset their tax on qualifying investments.

SEIS and EIS >

We’re a team of accountants, business advisors and Xero specialists based in Bristol, and working UK-wide with innovative businesses.

If you’re ambitious and passionate about what you do, we want to help you make bold business decisions and realise your full potential.

Tax planning for the year ahead

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