According to HMRC, as much as £400 billion of tax relief is being missed out on each year due to companies being unaware that they qualify for tax savings. We speak to Donna McCreadie at Perrys Chartered Accountants who gives her top tips for making sure your business is running as tax efficiently as possible
Review your current structure
Given the tax changes in recent years, and the impact of the global pandemic on the hospitality industry, now could be the right time to review your structure to ensure it is still the most tax efficient and cost-effective option for your business.
Most businesses look at their structure when business is booming, perhaps moving from sole trader or a partnership to a limited company structure. However, businesses can also disincorporate and move away from a corporate structure, if the tax savings are not outweighing the additional costs of compliance.
Remember though, limited companies can provide additional protection for business owners, as do limited liability partnerships, so it is important to look at the pros and cons of each option when deciding which structure is right for you.
Consider changing your year end
With Corporation Tax set to increase on 1st April 2023 to as much as 25% for companies with profits over £250,000, now could be the time to think about changing your year end to make the most of the existing 19% rate.
For example, if your company has a year-end of 30th September and profits are expected to be significantly higher in the first six months than the second six months of the year, then you could consider shortening your year end to 31st March to ‘bank’ the 19% rate on profits made to that date. Otherwise, the company’s profits will be apportioned evenly over the year, resulting in a higher tax liability over the 12 months.
Self-employed and partnership businesses with year-ends not aligned to the tax year (dates from 31st March to 5th April) are also facing a reform of the way their trading profits are taxed for income tax purposes. With plans to tax profits that are time-apportioned to the tax year, instead of the accounting period, to take effect from 2024/25, with transitional rules applying in 2023/24, it could be beneficial to assess the impact of the changes in advance and to consider a change to your year end.
Do a payroll check to see if you’re eligible for Employment Allowance
If you employ staff in your business, it’s important to check that you’re not missing out on allowances or reliefs that you may be entitled to. For example, if your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year, then you could be eligible for Employment Allowance.
Employment Allowance will reduce your annual National Insurance liability by up to £5,000. It can also be backdated by up to four years, so it is well worth the effort of running a check on your payroll to find out if it applies. You can do this yourself, or you can ask a bookkeeper to do it for you.
Get a free business health check
There are many other ways to ensure you and your business are operating as tax efficiently as possible; however, this is very much dependent on your individual circumstances. Therefore, why not take advantage of Perrys’ free business health check to ensure all your tax affairs are in order? To find out more, get in touch with Perrys by calling 0800 0191 451 or complete the contact form www.perrysaccountants.co.uk/contact-us