Time to prioritise tax planning

George Hay Chartered Accountants

Research carried out by Direct Line for Business in March 2016 revealed that of 180 small business owners surveyed, 46% claimed to have a ‘very poor’ understanding of the range of tax reliefs available to them.[1]

This lack of awareness and understanding amongst small businesses, when it comes to the UK’s complex tax system, is a common theme that receives attention from experts and professional bodies, year after year.

The Federation of Small Businesses (FSB) published research last month detailing similar findings. The survey of over 1000 small businesses found that 55% don’t feel informed about the tax reliefs available to them, 40% find exemptions confusing and 77% rely heavily on specialist firms to get their taxes right.[2]

Considering so many small businesses remain in the dark about the various tax reliefs and allowances that they may be able to claim, throughout the maturation of their business, thousands will likely be paying more tax than is required.

Not only this, but they will also be missing out on potentially significant annual savings, as well as forgoing contributions to pensions, savings and investments.

With the end of the tax year just around the corner, now is the perfect time to examine your current situation and identify any opportunities to implement tax-efficient plans going forward.

The past year has seen a stark lack of clarity for businesses and individuals when it comes to the tax system, making it extremely difficult to plan and strategize successfully, especially in the long-term.

The unforeseen general election, which took place in June 2017, was largely to blame as various key legislative changes were deferred, including HMRC’s Making Tax Digital programme.

Whether it’s Income Tax, ISA’s, or Capital Gains Tax, in the period leading up to the 5 April 2018 you should consider whether you have used the allowances and reliefs available to you effectively.

So, what’s changing in April 2018?

There are several changes you should be aware of as we transition from one financial year into another.

Upcoming tax changes, which will take effect from 6 April 2018, are important both when it comes to ensuring you are in the best position now and in the future.

  • From 6 April 2018, the tax-free Personal Allowance will increase from £11,500 to £11,850;
  • your ISA Allowance of £20,000 will renew on 6 April 2018;
  • the Dividend Allowance will reduce from £5,000 to £2,000;
  • for residential property lettings, only 50% of any interest paid will be fully deductible from rental income;
  • the Residence Nil Rate Band for Inheritance tax was introduced from 2017/18 but the amount increases for deaths on or after 6 April 2018 to £125,000 and;
  • the Capital Gains Tax annual exemption will increase from £11,300 to £11,700.

At all times, not just now, planning is vital if you are to ensure that your affairs are handled in a tax-efficient manner.

It’s important to bear in mind that your circumstances are likely to be very different to the next person, or the business down the road, so it is essential that you seek professional advice at the earliest opportunity.

Discussing your upcoming plans, for the next 12 months and beyond, with a tax advisor or accountant could help you to significantly reduce your liabilities.

If you’d like to talk to one of our team about effective tax planning, no matter what stage your business is at, please contact us today, or fill in one of our online enquiry forms.

[1] https://www.directlineforbusiness.co.uk/small-business-insurance/knowledge-centre/news/no-relief-small-businesses-missing-out-on-millions

[2] https://www.fsb.org.uk/docs/default-source/fsb-org-uk/fsb-tax-report—taxing-times-final.pdf?sfvrsn=0

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