Tax Year-End Planning for Unincorporated Businesses
Introduction:
So, with the April 5th tax year-end deadline rapidly approaching, now’s a great time for you to think about what you should be doing before the tax year actually ends.
To help, I’ll be writing 3 blog posts to help you prepare for the tax year end this week. They will be:
1) Planning for unincorporated businesses (e.g., sole traders);
2) Planning for Ltd Companies and
3) Planning for Individuals
This is the first instalment, focusing on Business (unincorporated businesses such as sole traders). Here are a few things you should be thinking about in preparation for the upcoming April 5th fiscal year-end.
Sole-Traders and Partnerships
As an unincorporated business, here’s 5 things you should be thinking about:
Capital Allowances. This is the tax relief you can get on buying a new kit to use in your business. For example, you are entitled to what we call an ‘Annual Investment Allowance’ on a new qualifying kit – in short, you can write off 100% of the cost of the kit against tax in the year you buy it.
Tax Tip: If you’re on the cusp of buying a new kit, buy it before your year end. If your year end is 31st March, you only have a few weeks left to bag this allowance otherwise you’ll have to wait another year to get the tax relief.
Tax Relief on Pension Contributions. As a sole trader or partner, you can make contributions to your private pension scheme. You will get a higher rate of tax relief on these contributions through your self-assessment tax return. However, if your pension payment hasn’t cleared out of your bank and into your pension scheme before the tax year end, it won’t count this year.
Tax Tip: Make your pension contributions in plenty of time before April 5th so you get the tax relief on this year’s return. If you make a contribution on April 6th or later, you’ll have to wait another year to get the tax relief!
Make those Charitable Donations asap. As with pension contributions, higher rate tax relief is available on gift-aided donations through your self-assessment tax return.
Tax Tip: Make those donations before the 5th of April coming up to get potential tax benefits on this year’s return!
Expenditure for Cash Basis businesses. Smaller unincorporated businesses with turnover under £150,000 can opt to use the ‘Cash Basis’ for their accountsIn this regime, you are taxed on the money in less the money out. So, if you’ve got that annual software subscription to buy (or something similar) get it bought now so it’s deducted from this year’s tax bill!
Tax Tip: If you’re on the Cash Basis and you’ve got a big expenditure item coming up like an annual subscription, buy it now so it will get deducted from your income in this tax year.
Here’s just some good old-fashioned solid advice. Make sure you claim everything: for example, a home office allowance (or a working from home allowance if you’re an employee), get your phone through the books, be sure to keep your mileage records and if you’ve got a family member helping you with the books, then pay them a salary for their trouble.
Tax Tip: Claim everything. Home office, working from home, phones, mileage and paying any family members helping you at weekends etc a small salary. This salary is tax deductible for you and may be tax free in the hands of your family member.
This isn’t a comprehensive checklist of everything to do for April 5th, simply a Top 5 List of things you should think about.
These are the sorts of things we help our clients with all day, every day.
