Every business should factor in some time before their year-end to plan and assess their business performance. This gives you an opportunity to seek out your true financial position and consider what to do to improve your position before your year-end and remedial action is no longer possible. 
Through doing a planning review you will get a realistic estimate of your profits, you will have the opportunity to make decisions based on that information and have the time to consider the effects your performance will have on your business and its stakeholders. 
There are two types of reviews you can undertake – a business profit review or business tax planning. 
Business profit review 
A business profit review will ensure that you are using accurate figures to make decisions and can take action before your year-end to remedy any issues as well as assist with planning. 
There are four steps to the review: 
Review your accounts – are assets depreciated realistically, bad debts written off, have you written off slow-moving stock, have you correctly allocated and capitalised on equipment purchases, and review your invoicing. 
Projections to year-end – use known factors for sales and current fixed costs, factor in any capital equipment spending, and prepare a cash flow forecast. 
Consider the results – how does this change your position? 
Action plan – draw up an action plan 
Contact us if you would like us to help you to conduct a business profit review. 
Business Tax Review 2023-24 
Pre-year-end tax planning is essential in ensuring that you are not paying more tax than you should be by checking that you and your company are operating in the most tax-efficient way. It also allows you to estimate your potential tax liabilities and reserve funds to pay for them. 
It is also worth considering if you are using the best VAT scheme for your business. If you use the standard scheme, one of the special VAT schemes may be better for you, especially if you are a small business. It is worth a discussion to see. 
Advice for the self-employed and limited companies differ so we have split the advice out. 
With making two payments on account in January and July, it is worth calculating your trading figures and forecasting your tax payments in case your profits are significantly different. Your payments will be based on the previous tax year, so it will give you chance to save the additional tax due or request a reduction in payment on account. 
You can defer claims for capital allowances if your projected profits are below the £12,570 threshold. 
You may want to bring forward capital investments and claim additional capital allowances if you are likely to breach one of the tax thresholds and go into a higher rate of tax or lose a tax benefit such as child benefit if your income exceeds £50,000. 
Farmers can use an average of their profits over a five or two-year period to help combat significant variations in their profit levels. 
The Annual Investment Allowance is still available and allows you to claim a write-off of 100% of expenditure up to £1 million on qualifying capital expenditure. 
Any taxable reductions you make will also reduce your Class 4 National Insurance contributions. 
It is also worth looking at the tax advice for individuals 2023-24 as well. 
Limited Companies 
Incorporated businesses are taxed at corporation tax rates, currently between 19% and 25%, and any profits retained in the business will be subject to no additional tax charge. This final point illustrates one of the major advantages of running a profitable business inside a limited company structure. If you are self-employed you may want to consider the benefits of incorporating your business. 
From April 2023 there are two rates of corporation tax. 1) For smaller companies with profits up to £50,000 who will continue to pay 19% tax. 2) Companies with profits over £50,000 will be subject to a 25% rate. Those with profits between £50,000 and £250,000 will be able to claim marginal relief. 
Marginal rates reduction from April 2023 will reduce if a company has an associated business. Businesses can restructure to avoid unnecessary increases in corporation tax. 
Companies who are considering investments in plant or other qualifying assets in excess of £1m, can fully expense their investment against profits. This was facilitated by the new “fully expensing” rules introduced in the Spring Budget March 2023. See our Full Expensing blog
It is good practice to have plans in place for succession and review them, this should also factor in any shareholder agreement changes since the last review. 
Shareholder dividends can be drawn tax-free up to £1,000 until April 2024. Is it possible to issue shares to adult children to provide them with a tax-free income? 
Do you want to have more flexibility in the dividends paid to shareholders based on tax liabilities? You can do this by converting existing shares into different classes so they can be allocated different amounts. 
Would it be beneficial to employ a spouse or child to provide taxable benefits? 
Director’s loans – consider taking a dividend to clear the loan (if reserves are available) or repaying the loan within nine months of trading year-end to avoid an additional corporation tax charge at 33.75%. 
It may be advisable for directors with semi-permanent deposits on loan to the company to charge interest as a basic rate taxpayer can receive £1,000 in interest tax-free and a higher rate taxpayer £500. 
The tax on-costs of running a company car fleet and tax implications for employees may justify a change in strategy. For example, lending the employee the money to buy their own car and paying them tax-free business mileage to cover running costs. 
If projected profits forecast a temporary dip or a loss in the short term, could the company’s accounting period be extended to embrace the loss and average down the taxable profits for the preceding period? 
If projected profits are forecasting a downturn, how will this affect director/shareholders’ remuneration in the coming months; will there be sufficient retained profits to maintain regular dividend payments? 
Be sure to consider the funding of corporation tax payments that will need to be made nine months and one day after the company’s accounting year-end date. 
For advice about business tax please contact us to discuss any queries and how we can assist you in tax planning for your business. 
Share this post:

Leave a comment: 

Our site uses cookies, including for advertising personalisation. For more information, see our cookie policy. Accept cookies and close
Reject cookies Manage settings