For the final week of the 2017/18 tax year, we've assembled some handy tips so you can make changes that will save you time, money and hassle in the year ahead.
Make the most of your tax relief
If, like many small business owners, your accounting year end is 5th April, now's the time to consider your capital asset purchases and disposals to ensure you get the most out of the tax relief you're entitled to.
Check out our chief accountant Emily's last-minute tax saving tips:
Capital asset purchases
If you're planning to buy a large piece of equipment for your business, such as a computer, it's worth checking how much you've already spent on large items of equipment so far this accounting year.
You can claim tax relief of up to £200,000 on qualifying assets with the Annual Investment Allowance - some assets such as cars don't qualify for this allowance. You can't carry any remaining allowance forward - so take advantage of it while you can!
Capital asset disposals
If you're a sole trader planning to sell an asset that would give rise to capital gains tax it might be a good idea to wait until after the end of this accounting year if you can. Then you'll pay the capital gains tax a year later!
However, if you're planning to sell more assets next year, you may want to spread the sales between two accounting years instead (for example, sell some in March and some in May), to make best use of your annual exemptions. Although you may pay tax sooner this way, you may pay less tax overall.
In 2017/18 the annual exempt amount that can be set against capital gains is £11,300. This amount can't be carried forward to the next tax year.
Speed up your spending - but be cautious!
Now is the time to be spending if you need extra day-to-day essentials, such as a new run of business cards, letterheads or envelopes. Even though items like these are intended to be used over a prolonged period of time, you are allowed to put the cost of them in the current tax year - so long as you purchase and start using them before the April deadline. So get ordering before 5th April 2018 in order to claim the tax relief a year earlier.
However, you'll need to be careful. If any costs relate to a specific time after 6th April 2018, then you'll have to carry them forward and claim tax relief on them at a later date.
For example, if you're attending a course in October 2018, and you pay for that bill before 5th April 2018 – you'll have to put the cost into the year ended 5th April 2019, because that's the tax year in which the event will be taking place. It doesn't matter that you actually paid for your ticket in the previous tax year.
Prepare for Making Tax Digital if you're VAT registered
Making Tax Digital (MTD) reporting for VAT will become compulsory from 1st April 2019 for all businesses who are, and have to be, registered for VAT. This means that if you're not already using a digital software to keep your books, 1st April 2018 would be the ideal time make the move!
This is because an accounting year end is the easiest time to switch to a new system, as you just need to carry over a few summary figures such as your accounting dates, how much your business owned and owed as at the end of the previous accounting year and your VAT registration number (if you’re VAT registered).
If you wait until April 2019 to switch you'll be grappling with a new bookkeeping system and a new tax return filing method at the same time, so it makes sense to take the opportunity to get ready early.
Don’t try to defer your business income
It might seem tempting to try and move your business's income into the next tax year, in order to pay the tax on this income a year later. But HMRC is wise to this trick! Income must be included in your accounts depending on when you did the work, not when you raised your invoices or when your customers paid you. So asking your customers to defer payment won't work, nor will dating all your invoices as 6th April 2018 instead of 1st April 2018.
Do your books and speak to your accountant
It’s a great idea to make sure your business's financial records are up to date and to also check in with your accountant, if you have one, before the end of the tax year. They may have other suggestions about how your business could be saving tax - but if you wait until after 5th April, you’ll have to wait until the next tax year to implement these.
For example, if you're a higher-rate taxpayer you could claim tax relief by putting money in a pension, or by making donations to charity. So, if you talk to your accountant before 5th April, you'll make it easier for them to help you.
By acting before the end of the tax year, you may find that you're able to help your business save tax legally and ethically.
We are always happy to speak to new or existing clients on any aspect of their bookkeeping or tax planning. Please don't hesitate to get in touch if you have any questions.