Happy new (tax) year!

Kirsty Young News, Tax

Whilst this is a popular accounting joke we do every year, (we don’t get out much!), it is also a fairly exciting point in the year for us tax geeks. The start of the new personal tax year means allowances are reset, and new tax planning opportunities arise!

To get you off to the most efficient start for 21/22, we’ve listed some key points to consider for the start of the new tax year.

 

For everyone who completes a tax return

  • It’s time to start gathering your paperwork for your tax return. As a reminder of the short of information you might need, check out our previous blog on the subject.
  • Get your 20/21 tax return completed early. Apart from the peace of mind that your return is done for the year, knowing what tax you need to pay in January next year will be great for planning purposes. If you are due to pay some tax in July, sending in your tax return can also have a positive impact on the amount you pay.

 

Ltd Company owners

  • Review your director’s salary. The tax allowances and ‘bands’ have changed again this year. So, you need to review your salary level to make sure it’s as tax efficient as it could be. Two common ‘efficient’ levels of salary this year will be around £735 a month, or £1045, depending on your circumstances.
  • Do you want to invest in new equipment? If so, make use of the new ‘Super Deduction’ rules. From 1st April, you could get a 130%(!) deduction for any big items your buy like new computers, equipment and vans. (Note, this only applies to Ltd companies.) The practical effect of this is for every £1 you spend, you save 25p in tax.
  • If you are not VAT registered, ensure you are monitoring your turnover (sales) throughout the year, especially if you are close to the VAT threshold of £85,000. You want to be ahead of the game and not get caught out by having to register late. Watch our video on the subject here.
  • Consider whether voluntary VAT registration is a beneficial option for you. It is possible to register before you reach the £85,000 threshold. This can often be beneficial if you are working directly for VAT-registered business, and is generally to be avoided if your clients are the public!
  • Think about whether you want to contribute to a pension this year. If you do, decide how you will pay into that pension. Using company ‘employer contributions’ only will often result in a better overall tax saving. Pensions can be complex, so speak to a professional before doing anything to be sure it’s right for you and your individual circumstances.
  • Plan your cash for the year. Take time to plan out your ‘ins and outs’ over the year. This is especially important if you are thinking of recruiting or growing in general. You can get a quick, free tool here to do this.

 

Sole Traders

  • Track your profits and review your numbers regularly. As the year goes on and your income accumulates, you could be better off operating as a limited company. If your profits are reaching around £30,000 a year, this is a great time for this discussion. If you don’t have a system to do this, consider setting up a cloud software solution such as QuickBooks.
  • If you are not VAT registered, ensure you are monitoring your turnover (sales) throughout the year. If you are close to the VAT threshold of £85,000, you will want to be ahead of the game and not get caught out by having to register late. Watch our video on the subject here.
  • Consider whether voluntary VAT registration is a beneficial option for you. It is possible to register before £85,000. This is often beneficial if you are working directly for VAT registered business, but generally to be avoided if your clients are the public!
  • Plan your cash for the year. Take time to plan out your ‘ins and outs’ over the year. This is especially important if you are thinking of recruiting or growing in general. You can get a quick, free tool here to do this.

 

Employers

  • Check if you are eligible for Employers Allowance, you re-send an ‘EPS’ (Employer Payment Summary) with the boxed ticked for Employers Allowance. You need to do this once every new tax year to continue to claim up to £4000 for your business.

 

And a general reminder….

If you sell a property and make money, you may need to do a special tax return within 30 days – don’t forget this!

If you need any help with these points, be sure to get in touch with our team – we’d love a chat.

 

Need some help? Just ask

Ask your accountant or book a consultation with us to help you make the most of your happy new tax year! Call us and book your a paid 1-hour, 1-2-1 consultation to ask your questions of any of our team of accountants. Never fear, you don’t have to become a client – we just like to help!