Tax Planning involves a thorough review of a financial position, analysing the current tax efficiency of an individual or business, whilst also forecasting ahead to future scenarios, seeking to minimise future tax liabilities. It is important to commence planning as early as possible within each financial year, or before any major financial transactions are made, to ensure that there is sufficient time to review any saving options for the whole financial year.
The main aim of developing a strategy is to timeline future financial objectives, including planning the necessary arrangements required to efficiently reduce the overall liability for yourself, your business, and/or your family members. There are various reliefs, allowances, and business structures available to individuals and businesses, therefore a strategy for which approach to apply and the timeframe required is necessary to receive the maximum benefits.
Tax Planning Accountants assist both individuals and businesses to calculate current tax liabilities and advise on various methods to legally reduce future liabilities. Our accountants undertake analysis of the wider family or business arrangement to ensure all avenues are explored such as maximising tax allowances, advising on legal income shifting strategies or applying for reliefs on behalf of clients. The highest level of planning would be to look at how various taxes interact for any given financial transaction/s, and to keep the overall liability to a minimum. A key question to ask is what is your end objective, and with this in mind what an analysis can be undertaken to look at how best to reduce taxes.
Our accounting experts can also provide a useful service in organising, defining and documenting various types of income and expenditure, ensure that the necessary accounting treatment is performed, and that all exemptions are claimed. Income from overseas may also be a consideration. Your residence and domicile for tax purposes may also have an impact on your overall liabilities. For example, if you are resident in the UK but domiciled elsewhere, then your foreign income is taxed to the extent that you remit it to the UK. Being aware of any proposed changes in legislation is essential when planning.
On a Personal basis, Tax Planning involves ensuring that tax-free allowances are fully utilised, opportunities to save tax are explored and plans are made in relation to expenditures, the timing of income, timing of purchases and the size of income. Planning strategies also include saving for retirement or engagement in gain-loss harvesting.
It is also important to know when to shift personal income to a different business structure. For example, a good accountant will be able to tell you when it is better for you to move your sole trader income to a limited company. Lowering your liabilities means more cash in your pocket. With recent changes to how property income and mortgage interest is treated if you are in the higher rate tax band then its likely better for you to transfer your property income and assets to a limited company structure. There are ways of doing this without paying Stamp Duty, SDLT, or Capital Gains, CGT.
Effective Business Tax planning involves a thorough review of the business structure and the personal financial position of the owners, alongside analysing the business income streams and expenses, to ensure that the most efficient tax strategies are in place. For owner managed business retirement is likely an important consideration. Considering the reduction in lifetime entrepreneurs’ relief the setting up of a self-administered small scheme for pension purposes is especially useful, particularly if the SASS holds a commercial property and then rents it to the business itself. Each company director can currently have £1.5m invested in a SASS. If in the worst case scenario, the business fails the directors will still benefit from the SASS, as legally it will be separate from the company and protected from creditors.
From time to time the government introduces tax breaks for business to help them grow. For a number of years now there has been a push to encourage innovation and research amongst UK business. To achieve this the government has what is called Research & Development tax credits scheme, which is one of the most attractive in the world. This means that HMRC will give you a percentage of your R&D costs back to you in some cases, as well as give a higher rate of corporation tax relief on allowable R&D costs.
HMRC allow some enhanced capital allowances, these will depend on the type of expenditure and or the size of the company. So rather than claiming relief over a period a business can claim 100% of the cost in the first year. Al businesses can claim the annual investment allowance which is 100% of the cost of investments up to £1m every year.
If you are involved in property then qualifying costs related to the remediation of contaminated or derelict land can be deducted at 150% in the year they where incurred, and for companies doing this and trading at a loss HMRC will pay 24% of the qualifying remediation spend back to the company.
Organising business records and keeping on top of HMRC deadlines can be vital methods of minimising the overall tax burden to a business. By investing in an experienced accountant, the costs of accurate record keeping, organisation and expertise can soon be offset by ensuring that submissions are made on time, and claims are made for the necessary deductions, reliefs and allowances, ultimately limiting the overall businesses’ costs.
Changes in taxation laws can affect business planning. An example of this for property investors was the introduction of clause 24. This has led to many property investors incorporating their property portfolios. It is widely expected that the chancellor will increase personal, corporate, and national insurance taxes. Planning therefore seems to be an important topic right now.
Finance Equation is a firm of chartered certified accountants serving businesses throughout London and Essex. We offer extensive experience and personal attention when it comes to providing tax planning advice, which is designed to legally put more money in your pocket.
Our expert team recognise that tax is a cost just like any other business cost, and therefore we pro-actively use every legal option to reduce your overall liability.
To schedule a no-obligation consultation – call us on 020 3086 7472.
The Finance Equation Ltd is a company registered in England & Wales. Company number 05116983. Business address: Finance Equation Ltd, 334 Ley Street, Ilford, Essex, IG1 4AF.
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