Get your tax return done early so that you have more time to save the tax due. The deadline for payment is still 31 January 2025. If your income has reduced this year then we may also be able to reduce your July payments on account.
Company cars are not really tax efficient and we often advise clients to buy the car privately and just charge the company for mileage. For one client with expensive taste in cars we even recommended staying as a sole trader rather than a limited company.
This is because cars are treated as benefits in kind and taxed as if you have additional salary. The value of this benefit is based on a percentage of list price (including accessories). The employee pays tax and national insurance and the employer also pays national insurance.
The percentage used for electric vehicles is much lower than for others although this is increasing each year.
As well as the vehicle and fuel for personal use is taxed at a flat rate for the year so work out how much you use to see if it is tax efficient.
If your turnover exceeds, or is expected to exceed, £85,000 in any twelve month period you will need to register for VAT from the following month.
Please note that this is a rolling 12 month period, NOT your financial year. It is a common mistake so, each month, you need to keep an eye on your sales in the previous 12 months.
We’ve had a few clients go over the VAT limit in the middle of their financial year and only find out when we do their year end accounts some time later. This means that they may end up having to pay the VAT themselves so it is worth keeping an eye on your invoicing.
Payments on account can add a large chunk onto the amount of tax that you have to pay. If your income is likely to be lower next year than this year then it may be worth reducing your payments on account and we sometimes do this for clients who are winding up their sole trader business or who are going through a hard time. But BEWARE! If you reduce your payments too low and the final tax bill comes out higher then you will have to pay interest on the shortfall. This is to discourage people from reducing their payments too far.
Till systems have changed since I had a little cash register as a child. These days they usually run on a tablet. They may include an integral card payment system or have a small palm sized device attached. The local Clover salesman did a good job in the area and we help clients to keep their VAT and stock records using the software. It integrates into Xero and other bookkeeping apps to save time and minimise errors by typing numbers from one system into another.
Don’t forget that corporation tax rates increased to 25% from 1 April this year for business profits over £250,000. If your profits are below £50,000 then you still pay tax at 19%. If your profits lie between £50,000 and 250,000 then you pay a marginal rate of 26.5%.
So how does this work if your year end isn’t April?
Say you have profits of £300,000 for the year ended 30 September 2023. 6/12 of your profit will be taxed at the old rate of 19% and 6/12 will be taxed at the new rate of 25%.
Although we have software that works this out for us we still do a quick calculation to double check that we have input everything correctly.
When we complete annual accounts here at Minerva we carry out a simple tax review for all our business clients. We can then contact them if we think they’re not taking advantage of all the obvious reliefs:
Would they be better off (financially) as a limited company or a sole trader/partnership?
Do they need to register for VAT? Would there be any benefit to registering voluntarily?
Does their spouse or child work in the business or could they be a shareholder?
Salary, dividend, pension? Are they taking £ out of their business in the most tax efficient way possible?
Are they approaching the £50-60k band for repaying child benefit?
Do they need to be saving for a pension? (Our All In Place review goes into this in more detail)
Should they receive interest on money that they have loaned to the business?
Are they claiming for use of their own home for business purposes?
Are research and development tax credits applicable?
Could they register for EIS/SEIS to encourage investors?
EIS/SEIS refer to the (Small) Enterprise Investment Scheme. This can be a tax efficient way to invest in a small business or for other people to invest in your business. The idea is to help early stage start ups to raise capital.
Individuals can invest up to £100k per year in qualifying companies and receive up to 50% back in tax relief. There are also benefits for capital gains and inheritance tax relief.