Before your company year end arrives it’s important to take the opportunity to minimise your tax bill before it’s too late. Taking a few minutes to read this guide could save you hundreds in tax.
If you’ve had a successful year and your company has made a profit, Corporation Tax will become payable. There may still however be opportunities before your year end arrives to reduce your Corporation Tax bill.
The aim of this guide is to provide you with tips, advice and checks to complete.
It’s crucial that you take action before your year end for it to be included in your accounts and Corporation Tax calculations. Any transactions must be on your bank statement and recorded in Provestor before your company year end.
The simple fact is that the more you spend the lower your profit, and the less tax you pay. If you have any planned expenses or purchases then just before the end of your year is a great time to maximise your company’s outgoings.
Ensuring all expenses are claimed will save at least 19% in tax relief for those that are wholly, exclusively and necessarily for the purpose of business.
Here are some typical outgoings to give you some ideas:
Expenses paid for using personal money – make sure any business expenses paid for using personal cash are recorded in the Expenses screen and claimed back from your company. Every bit goes to saving tax so dig out any old receipts.
Home office allowance – it’s likely that you keep on top of your company affairs at home. Don’t forget that you can claim for using your home as an office.
Staff events – each year a company can pay for annual staff events up to £150 (including VAT) per guest which is allowable for Corporation Tax relief. The rules are that all members of the company must be invited and a spouse or partner can attend provided the cost for the couple does not exceed £300 (including VAT). It will be tax free provided the limit is not exceeded, if it does the whole cost is taxable, not just the excess. This is not an allowance, you must include the actual cost of the event and have receipts to support this.
Stock up on office supplies – for example printer cartridges, paper, stationery or other general office supplies.
Purchase assets for company use – including IT equipment, software and office equipment.
Mobile or smart phones – businesses benefit from the connected world and a smart phone is the perfect tool. If you need and use a mobile phone for business and don’t yet have the contract in your businesses name, consider transferring it. For it to be an allowable expense the contract must be in the name of the business and paid for directly by the business. Don’t worry, HMRC consider personal use to be incidental.
Refurbishment - These expenses can be quite complex. As a general rule, if the expenditure is for maintenance or repairs, you can claim it as an expense. If the expense is for a new item or asset, or is an improvement, it is treated as capital. Take a look at this guide for more information.
Other items – it’s also a good time to get any equipment repaired, updated or serviced and to ensure your insurances are up to date.
You can read more about business expenses to see if there is anything else you should be claiming.
If your looking for an income from your company, it’s a good time to pay yourself or your partner for any legitimate work that’s been done throughout the year. For example, if your spouse helps with company admin or project management, you may be able to pay them a salary or bonus which will reduce your Corporation Tax liability.
Paying someone a salary will need them to be on the company payroll. If they’re not already an employee of you’ll need to act now if you wish to pay a salary, as payroll can not be back-dated.
A key tax advantage of running a business is the opportunity to keep national insurance costs low. Typically this is achieved by ensuring the directors salary is set to an optimum level.
You may already have insurance in place to protect your business and properties. The end of your financial year can be a good time to review your cover.
If you're not seeking an income from your company or saving for your next property, you might be considering investing in a pension. You’re probably aware that a company pension is an easy way to reduce your tax liability, as well as building up a fund for the future. Employer contributions to pensions are allowable for tax purposes so are taken from your company’s pre-tax earnings, hence they can help reduce your tax bills.
The end of your company’s year is a good time to take stock of your retirement planning and to top up your pension. If you plan to top up your pension, please ensure any payments are made and received by the pension company before your year end.
Please keep in mind that pensions are a complicated subject and you should take advice from an Independent Financial Advisor to ensure that you follow the correct rules and for advice on how much can / should be invested. As accountants, we are not authorised to provide any advice regarding pensions.