save a few quid in taxWant to save a few quid by in tax before the end of the fiscal year?

At KMA, David has been hard at it, producing for you, a brief tax planning article on some suggestions on how to save a few quid in tax before the end of this current Fiscal year. You’ll know this is an area that, whilst it is vitally important to try to minimise tax wherever possible so you pay the correct amount.

5th April is the end of the 2016/17 tax year. 31st March is the end of another financial year for many unincorporated businesses and some Limited Companies.

The good news is that there is still time to do some last minute tax planning so that you don’t pay a penny more in tax this year than you need to.

Here is my list of top 7 tax saving strategies for this year:-

1.    Family members

 Have you had a family member, such as a teenage child, helping you out in your business this year?

P.S. What many people don’t realise is that it’s ok to pay them out of the business!

If, say, you have paid them say £2,500 then I expect you will save around £500 in tax. 

2.    Dividends

This is the first year when dividends are no longer completely tax free to basic rate taxpayers. 

Our general view is that shareholders, where possible, should declare a final dividend that takes their total income for the year up to, but not beyond, the basic rate tax threshold of £42,385.

Everyone’s situation is different so this general advice will vary. Almost certainly the biggest factor to consider is the expected income of all shareholders – both this year (2016/17) and next year (2017/18). Tax planning will be especially important if there is likely to be a big difference in the income between the 2 years.

P.S. Declaring extra dividends to increase your income may be advisable if you’re thinking of moving house in the next year or so – lenders often look your income for the 3 years when assessing their mortgage offer. 

P.P.S. Remember that spouses and/or adult children can also be shareholders and may receive a dividend which could be tax efficient.

P.P.S. If you’re currently claiming child benefit then it may be worth delaying paying an extra dividend to yourself which would take your income over £50,000 until 6th April. If your income is more than £50,000 then you will have to pay back some of the tax free child benefit.

3.    Pension contributions

If you have any spare cash then making payments into your pension could be an attractive option as pensions still remain tax efficient.

If you have a limited company then the company can pay £10,000 on your behalf into your pension. In doing so your company will save £2,000 in corporation tax. 

P.S. Remember that pension contributions for which each person gets tax relief for are capped at £40,000 for 2016/17 AND £1m over their lifetime.

4.    Buy new equipment 

If you are thinking for example,  of buying a new computer, getting a new van or replacing a piece of machinery in the factory because it’s on its last legs? 

If so then why not buy now before the year end as it will save you tax this year? A delay of a few weeks will mean you have to wait another 2 months before you save the tax. Currently, the first £500,000 you spend can be offset against your profit and therefore reduces your tax.

P.S. This applies if you don’t have enough cash and buy whatever it is on HP.

 

5.    Claim Married Couple’s Allowance

Do you expect your spouse to earn less than £11,600? If so then it will almost certainly save you tax if you transfer part of their tax free personal tax allowance to you.

P.S. Click this link and complete the short online form to do this.

https://www.gov.uk/marriage-allowance

 

6.    Capital gains tax (CGT) allowance

Did you know that the average share price of the UK’s top companies have shot up by 20% over the last year?  Well, they have – hence why the FTSE closed on Friday at a record high.

If you’ve got a share portfolio then you may not realise that you may end up having to pay a lot of tax when you end up selling a chunk of shares.

One option to save future tax bills is to sell enough shares that you make a profit of less than £11,100. If you do then there would be no tax to pay on the sale as the profit is less than your tax free Capital Gains Tax Allowance. If you wish to buy the shares back at some point in the future in the next tax year then you can. (Obviously this comment assumes you are not using your capital gains tax allowance elsewhere!) 

P.S. If you have a spouse then they can do the same thing (everyone has their own tax free CGT allowance) – you must though transfer the shares to your spouse first!

7.    Unclaimed expenses

With a few weeks to go now is a good time to go through the paperwork in the home office and glance back over your personal credit card statement to find all those business receipts that you’d forgotten to claim for. Whatever you find will be claimed as a business cost and will save you tax.

P.S. The most frequently overlooked cost is travel – from business trips (45p per mile on the first 10,000 and 25p thereafter) to cups of coffee and from rail tickets to hotel bills.

Hope that has given you some food for thought!  Give David a call on 0161 410 0020 if you need any further help or information on anything from above.

This article is for general information only and no action should be taken, or refrained from, as a result of this information.  Professional advice should be taken based on specific circumstances in each individual case.  Whilst we endeavour to ensure that the information contained in the article is correct, no liability  will be accepted by KMA Accountancy which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action or decision taken as a result of using any such information.

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