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.
Seven reasons to get your tax return done early. (It always amazes me why people leave this until the last 2-3 months)
- Know how much tax to pay with plenty of time to save up if necessary
- Have your latest accounts ready if you need finance or a mortgage
- Latest information available for tax and business planning
- Time to implement tax saving measures
- Less time to lose paperwork and easier to answer your accountant’s queries better
- Your accountant will provide a better service when they have enough time to carry out the work without the pressure of an impending deadline
- Your accountant will be happy and may even consider you an A grade client (yes, we do grade our clients)
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.
You can save a great deal of tax by avoiding an overdrawn director’s loan account (DLA). In other words don’t take more money out of the company than the dividends and expenses that have been allowed (see previous tips).
If your DLA is overdrawn at the end of the year and not repaid within 9 months of the year end the company will have to pay S455 tax at 33.75%. This can be reclaimed on the next tax return if the loan has been repaid (but you can’t repay it then taken out again!)
If your DLA is more than £10k overdrawn at any time in the year you will incur a personal benefit in kind (unless you pay the company interest on the loan). The company will also pay class 1A national insurance on the notional interest. The rate of interest is set by HMRC each year.
We want you to pay the right amount of tax and not waste your hard earned money on unnecessary penalty taxes like these. Regular, up to date bookkeeping will ensure that you keep track of your DLA.
Don’t forget to claim the VAT on business mileage.
You can’t claim VAT on the full 45p but you can claim on the fuel element. You can find out the current fuel element Advisory fuel rates – GOV.UK (www.gov.uk)
For instance my care has a fuel rate of 14p. This means that, for every mile, I can claim 14p *20/120 = 2.33p in VAT. There is no VAT on the remaining 31p as that is deemed to be for insurance, maintenance, wear and tear etc.
All you need to do is to keep a VAT invoice* (not a credit card receipt please!) for fuel around the date of the journey ie when you you fill up before or after the trip.
*If you’re interested then it’s because the 45p is an allowance and EU/UK law states that you can’t claim VAT on allowances. The EU did one of their usual accommodating moves and agreed that, as long as there was a valid VAT invoice for fuel around the same date (eg filling up before or after the mileage) then the company could claim VAT on the fuel element of the 45p.
We’ve been busy doing Clarity Business Reviews for new clients. But what is a Clarity review?
Clarity is software that will connect directly to Xero or Quickbooks (or we can enter figures manually from other software). We can then look at 7 key indicators that reflect the profitability, value, and efficiency of your business. And how we can improve those 7 figures and your business as a whole.
Over zoom we discuss your business and identify actions within 5 areas so that you go away with an action plan.
The whole thing takes about an hour.
Then there are three options:
-Work through the actions on your own
-Join our Minerva Mastermind group on Facebook and a monthly Zoom call to check in on how you’re doing and maybe book an annual Clarity review
-Book monthly or quarterly coaching to help you to work through your action plan (Della is a qualified business coach and mentor as well as a chartered accountant)