10 Steps to Predictable, Lower Tax Bills
31st January 2018
It's amazing how many business owners are not advised of their tax payments in advance.
The shock and anxiety an unexpectedly large bill can cause is avoided when your accountant follows this annual tax planning process:
1. Review of your family goals
An accountant looking to make a difference to your life reviews your family goals with you every year. They consider your tax position to ensure you keep every penny possible to fund these goals, rather than passing unnecessary money to the Taxman.
2. Plan your expenditure
Your accountant discusses any upcoming business purchases you intend to make, such as office furniture and equipment. They advise whether you should make these purchases before or after your year-end in order to maximise tax efficiency.
3. Pension planning
Your accountant discusses pension payments which can be made before the end of the tax year to reduce your tax bill.
4. Capital Allowance planning
Your accountant ensures you are making full use of the Annual Investment Allowance (AIA) which gives 100% tax relief on certain capital expenditure e.g. equipment, vans. The maximum AIA in any one year is currently £200,000 and your accountant ensures you use as much of this allowance as possible.
5. Review your business structure
Your accountant reviews your business structure and considers whether your tax position will be improved by incorporating, forming a partnership or even dis-incorporating to trade as a sole trader.
6. Review your year-end date
Your accountant considers the opportunity to change your accounting year-end in order to push back your tax payments with you. This review is especially important should you be experiencing cashflow issues.
7. Produce your accounts quickly
Your accounts show your business profit. It’s this figure, adjusted for tax purposes, on which you pay tax.
So the quicker your accountant produces your accounts after your year-end, the quicker you see your business profit. And the quicker the level of tax you will need to pay can be calculated.
Ideally your accountant produces your draft accounts within 20 working days of receiving your books and records.
8. Forecast your upcoming tax bills
Once your accounts are finalised your accountant provides a tax forecast showing your payments for the next three years.
9. Post year-end tax planning
Your accountant reviews ways to further reduce your tax bill during your accounts review meeting.
- raising potential opportunities to reduce your liabilities
- reviewing your personal remuneration arrangements (how you extract income for yourself from your business)
- helping you take the actions you agree
10.Review your payments on account
Your accountant discusses the results you expect to generate during the coming year, before reviewing your payments on account for the next January and July. If your future profits are expected to fall, you can claim the reduce these payments.
This tax planning process benefits the dentists we work with hugely. It helps them plan how much money they need to put aside each month so paying their tax is never a challenge.
If you have been stung by an unexpectedly large tax bill this year, you don't have to live with the stress. Make sure your accountant follows this process for you.
If you’d like to discuss how this process can help produce predictable, lower tax bills for you call me on 01249 712074 or email me at firstname.lastname@example.org. I’ll be pleased to discuss this service with you.
Business & Corporate Tax Manager