Do I need to do any year end tax planning 5th April 2023? Why do I need to do year end tax planning 5th April 2023? Who needs to do year end tax planning 5th April 2023?
As we are getting towards the tax year end of 5 April, it is worth looking at whether there is anything you can do before this date to maximise your tax reliefs and to possibly save money.
For Limited Companies it is always good practice to consider certain things to see whether or not you can help to reduce any Corporation Tax payable or to save yourself tax/NIC when extracting profits.
This is one of the many reasons as to why it is useful to know what profit/loss you have made on a weekly/monthly basis so that better, more informed, decisions can be made. I advise using bookkeeping software and keeping on top of entering the transactions so you have a more accurate picture.
Individuals
- Take advantage of your Capital Gains tax allowance of £12,300 before 5 April to use this year’s allowance as any unused amount cannot be carried forward. On 6 April 2023 the allowance reduces to only £6000 and then on 6 April 2024 it reduces again to £3000.
- A percentage of child benefit has to be repaid if your income is above £50k (and repaid completely if above £60k). If your earnings are around this amount, making charitable donations or pension contributions can reduce your income and therefore save you having to repay the Child Benefit.
Marriage Allowance
- If you are married or in a civil partnership, look to see whether you or your partner can claim the marriage allowance. This is where the lower earners income must be below the personal allowance (currently £12,570) and the higher earner is a basic rate taxpayer. The lower earner can transfer £1,260 of their personal allowance to the higher earner which will save £252 a year in tax. The claim can be backdated up to 4 years.
- Tax relief is available on charitable donations made by an individual who has paid income tax equivalent or more than the tax on the donation.
- If you are an employee and pay for professional subscriptions personally then you can claim tax relief for these amounts subject to them appearing on “HMRC’s list 3” which is available to look at online.
Capital Allowances
- Capital allowances are available to claim at 100% for most plant and equipment so if your accounting year end is 31 March/5 April consider making any large investments in equipment before then to be eligible for the relief.
- Individual Savings Accounts (ISAs) are tax-free savings accounts for qualifying individuals with annual subscription limits per tax year. You may invest up to £20,000 in 2022-23 into a cash or a stocks and shares ISA. Interest is received tax-free in a cash ISA. In a stocks and shares ISA, dividends received and capital gains made are tax-free.
Pensions
- Pensions: annual allowance. An individual’s tax-relieved pension contributions are restricted by their annual allowance. The basic annual allowance is £40,000, but this may be reduced. In some cases, unused annual allowances can be brought forward from the previous three tax years. A review should be undertaken to ensure that full advantage is being taken of available annual allowances before 6 April 2023, or that the maximum possible allowances are carried forward to 2023-24.
Basis period reform for sole traders/partnerships
The Current Year Basis of assessment ceases from 2024-25.
2023-24 is a transitional year, in which additional profits (for businesses with non-31 March/5 April year ends) will be taxed. A deduction for overlap profits will be given.
If you will be subject to the reform, consider whether changing your year-end before the 2023-24 transition year may give a better tax result based on estimated profits.
Limited Companies
- There is a ‘super-deduction’ available for Limited Companies of 130% tax relief for the purchase of any new plant or equipment, this allowance ceases on 31 March 2023. It does not apply to equipment bought second hand though.
- If your Company has sufficient profits, taking a dividend out of the business could be the most tax efficient way as the rate is only 8.75% if withing your basic rate band and 33.75% if this takes you into higher rate. It is normally also worth taking a minimal salary to obtain a NIC qualifying year credit too. The first £2000 of dividends are completely tax free. From 6 April 2023 this reduces to £1000 a year and then from 6 April 2024 it reduces again to only £500 a year tax free.
Pension Contributions
- Pension contributions have to be physically paid before the year end to be included in the accounts and to obtain a relief against Corporation Tax.
- From 1 April 2023, Corporation Tax rates increase to 25% for companies with taxable profits above £250,000. The 19% rate will continue to apply to companies with profits below £50,000. Where profits are between £50,000 and £250,000 marginal rates will apply.
TAX PLANNING
Whilst completion of tax returns and statutory tax obligations are important jobs, all accountants should be capable of completing them and advising you of your tax position and liabilities. Here at Jolly Accountancy Services, we try to do more than just this and are interested in maximising your tax planning opportunities.
We all have to pay our taxes but within the legal framework there are numerous ways of saving tax and making sure you do not pay a penny more than is absolutely necessary. We have extensive experience in this area of work and always fight as hard as we can for our clients.
“If you need assistance in this area, I am more than happy to help!”
