In this episode, we explore actionable tax planning strategies to help UK small business owners reduce their tax liabilities and maximise their savings. From claiming deductions to leveraging tax-efficient investments, this episode is packed with tips to help you prepare for the end of the tax year.
What You’ll Learn:
• The importance of proactive tax planning
• How to maximise deductions and allowances
• Tax-efficient investments to reduce your taxable income
• Tips for preparing your self-assessment tax return
• Last-minute year-end tax planning strategies
Resources Mentioned:
• Download the FREE Comprehensive Tax Planning Toolkit
Connect with Me:
- Profit First UK Facebook Group: https://www.facebook.com/groups/915326342418247
- Instagram: https://www.instagram.com/annettefergs/
- LinkedIn: https://www.linkedin.com/in/annettefergusonuk/
- Website: https://www.annetteandco.co.uk/
Transcript:
Today, we’re diving into a topic that’s on every small business owner’s mind: tax planning. As we approach the end of the tax year, it’s crucial for UK small business owners to take a proactive approach to tax planning to reduce their tax bill and keep more money in their pockets.
In this episode, we’re covering essential tax planning strategies that will help you optimise your tax position, maximise deductions, and prepare for the upcoming tax year. So, whether you’re just starting out or you’ve been running your business for years, this episode is packed with actionable insights to help you save on taxes.”
The Importance of Tax Planning
“Let’s start with why tax planning is so important. Many small business owners wait until the last minute to think about taxes, and by then, it’s often too late to make significant changes. Proactive tax planning allows you to take advantage of tax reliefs, allowances, and deductions to lower your tax liability.
For example, if you start planning early, you can allocate expenses strategically, maximise your pension contributions, or even adjust your dividend payments to minimise your tax bill. The goal is to optimise your tax position so you can reinvest more into your business.”
Tip: “One way to get started is by downloading our FREE Comprehensive Tax Planning Toolkit, which will help you outline your tax planning strategy for the year.”
Maximising Deductions and Allowances
“Now let’s talk about deductions and allowances. Many business owners overlook potential deductions, which means they end up paying more tax than necessary. For example, did you know you can claim expenses like mileage, and a portion of your home office if you work from home?
If you use your own vehicle for work travel you can claim up to 45p a mile for the first 10,000 business miles by car, 24p by motorcycles, or 20p by bicycles. You cannot claim for journeys between your home and your standard place of business. By "claim", what I mean is that amount is tax deductible and is payable back to you personally.
Working from home means you can "claim" a portion of costs. There are 2 ways to do that, the simplified method and the actual costs method
You can use the simplified method when you work for 25 hours or more a month from home. The allowable rates are:
25-50 hours £10 flat rate per month
51-100 hours per month is £18 flat rate per month
and
101 hours per month or more is £26 flat rate per month
For the actual costs method you can calculate and claim the exact costs you have working from home including a portion of your electricity and gas bills.
People like to try to add in things like council tax and mortgage payments in to this calculation, but you have to be careful of not putting your home in to capital gains tax doing this and I advise if you looking at this you consult your accountant to make sure you don't cause yourself problems further down the line.
As with mileage the working from home amount can be made as a payment to you and included in the tax return.
If you run a limited company don't forget Trivial Benefits. Trivial benefits are where you can take an additional benefit from your business with no tax consequences personally and they are tax deductible for corporation tax.
You can provide yourself this benefit up to £300 in a year, and the criteria is that:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for work or performance
- it isn’t in the terms of your contract
What we recommend is that you gift yourself, every 2 months, from your business, £50, in vouchers - we do John Lewis, and many clients choose Amazon vouchers. This is completely tax allowable for the business.
Additionally, capital allowances allow you to deduct the cost of certain business assets like equipment, machinery, and even vehicles. And don’t forget about R&D tax credits—you don’t have to be a tech company to qualify; even service-based businesses can benefit.
📥 Download our FREE Comprehensive Tax Planning Toolkit to ensure you’re not leaving money on the table.”
Tax-Efficient Investments
“Another key aspect of tax planning is tax-efficient investments. Contributing to a pension plan, such as a Self-Invested Personal Pension (SIPP), is one of the most effective ways to reduce your taxable income while saving for retirement. Higher-rate taxpayers can get up to 40% relief on contributions. Pension contributions from your limited company are deductible for corporation tax too.
For reducing your personal tax, you can also consider using ISAs, Venture Capital Trusts (VCTs), or the Enterprise Investment Scheme (EIS) to benefit from generous tax reliefs on your investments. These options can help you grow your wealth while minimising your tax bill.”
And don't forget that when you put your money in to Premium Bonds the payouts are tax free, along with the ability to instantly access your money. This can be a really good option for parking your personal emergency fund.
Preparing for the Self-Assessment Tax Return
“Let’s shift gears and discuss self-assessment tax returns. Filing your self-assessment on time is crucial to avoid penalties, but it’s also an opportunity to optimise your tax position. Make sure you have all your income records, expense receipts, and dividend payments organised well in advance.
If you’re required to make payments on account, plan ahead so you’re not caught off guard.
Payments on account are when you have to pay towards the next year tax bill and if you are just entering the payments on account system or if you have a growing business this can mean that your January payment ends up being higher than you would initially expect. Then you will also have a 31st July payment to make as well
Remember, missing the January 31st deadline can result in hefty penalties, so don’t leave it until the last minute.
Year-End Tax Planning Strategies
“As the end of the tax year approaches, there are several last-minute strategies you can use to optimise your tax situation. Reviewing your profit and loss statement, making last-minute pension contributions, and adjusting your dividend payments are all effective ways to reduce your taxable income.
If you’re a higher-rate taxpayer, consider making charitable donations before the tax year ends to benefit from tax relief. And don’t forget to review your capital gains to see if there are opportunities to offset gains with losses.
📥 Download our FREE Comprehensive Tax Planning Toolkit to help you get organised
Conclusion
“Tax planning can be overwhelming, but with the right strategies, it doesn’t have to be. By taking a proactive approach, you can save money, reduce stress, and set your business up for success.
If you’re ready to take control of your taxes, download our Comprehensive Tax Planning Toolkit, which includes a bunch of tax planning resources for you to utilise.
Thank you so much for tuning in!
