Business Owners Planning Review 2023-24

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. 

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.