Advice for Small Business LeeP Clients for the end of the Tax Year
The end of the tax year is the 5th April 2017 and everything is pretty much done and dusted right? Wrong – this time of year means a lot of things for small businesses. It’s not only time to start thinking about what you want to achieve next year and work on your formal goal setting process, but also time to consider some tax planning options still open to you for the current year.
In fact, right now is the time to check-in with us to see if there is anything you should be doing to make sure your business ends the year fiscally healthy.
A few small changes can make a big difference in your total income and tax liability for the year.
To get you started, here are a few important year-end tax preparation steps you can take in order to close out the year financially and take advantage of additional deductions:
- Review Your Reports
How was your year financially? This info is vital for your goal setting process and to ensure your books are up-to-date, accurate and you’ve priced your services appropriately. If you’re not using Quickbooks online, then it’s time to provide us with all your transactions for the year, allow us time to process them and then schedule a time to walk through your business finances to date together.
- Defer Income
Any income received by 5th April 2017 counts as income for the current year. Shifting income to the 6th April or after delays it from being counted as income until the following tax year, and this can save you a significant amount of money, depending where your income levels are each year.
So, ask us if it makes sense to defer payments by 1 day to cut your tax bill.
- Make Purchases & Invest in your Business
Now is the time to spend money on items your business needs so you can maximise deductions. Does your equipment need to be upgraded? Can you stock up on office supplies? Do you require a new van or laptop?.
Make a list of purchases you can make now to get the most out of your allowable deductions.
Also, be aware of the new Vehicle Excise Duty that comes into force from 1 April 2017 on new vehicles – even low emission vehicles will have to pay a much higher rate of road tax and some high emission vehicles will get hit for up to £2,000 – so worth thinking about buying and registering your new vehicle before the 1st of April to escape this hike.
4. Run a Stock Check
If you handle stock and there has been a drop in market value of your stock, you may be able to claim additional deductions. This depends on your accounting methods, so make sure you check with your accountant to see if this makes sense for your small business.
5. Start or Contribute to a Retirement Plan
Make payments to your retirement plan or set one up before 5th April 2017 to reduce your income for this year. Now is the time to max out your contributions. If you haven’t yet set up a retirement account, talk to a financial advisor to determine which plan is best for your business. You can currently pay as much into your pension as you earn each year, up to a maximum of £40,000. But the rules are changing in April and the next few months could be the last chance to take advantage of the Government’s current generous tax relief. These contributions are a business deductible expense which reduce your taxable profit.
6. Contribute to Charity or a Registered Community Amateur Sports Club
Not only is making a charitable contribution from your small business a great thing to do for your own well-being, but it can also be a good idea for your business finances. If you give through Gift Aid then it’s even better! The government grosses up your donation by 25% AND your business gets tax relief on the grossed up amount. And you don’t have to donate money. You can also donate items such as clothing, toys and other goods, and claim a deduction for the fair market value.
Just be sure to get proper documentation and a receipt for your records.
7. Company Directors & Employees
If you’re operating through a Company and you are a Company Director, then you will have an obligation to submit a Self Assessment Tax return for the tax year ended 5th April 2017. Talk to us about how best to utilise yours (and your spouses) dividend allowance for the current year.