The fifth of April’s coming up fast, so make sure you do these things as a business accountant. Whether you’re a business owner or not, there are many things just before the fifth of April you should be reviewing to see if you can make sure you make the most of your allowances. So we’re not talking about some weird super-aggressive tax saving, you know, a tax avoidance scheme or anything like that. We’re just talking about what allowances have you got that you could use to make sure you’re paying only the right amount of tax, and of course, there are a lot of use it or lose it style allowances that if you don’t use before the end of the personal tax year, there’s going to be a problem. Now we are going to tell you mainly about personal tax-type stuff but from a business owner perspective.
Let’s talk about some of the allowances that are available to you now, and it’s a relatively short list actually from an action point of view. Still, there are some key things to talk about so. The first one would be a limited company owner, considering whether you can pay any dividends out. Everybody in the UK gets an allowance of 2 000 pounds generally of dividends they can have tax-free in their own hand’s company would have paid corporation tax on it. Still, you won’t pay any dividend tax if your dividend income is under two thousand pound, so you want to be reviewing your accounts to see if that’s possible; if you’ve got an accountant even better, you can speak to them about it but generally start thinking can I pay this 2000 pound dividend? Make sure you’ve considered that as soon as possible, and if you’re, you know, sharing finances with a significant other in the house, if they’re on the company, can they do the same you know it’s those kinds of things, so check your dividends. Number one, there are some more boring things we always think about, but it’s like ISIS. Hence, people get excited about ISIS. If you’ve not heard of those, they’re kind of like a imagine they’re sort of a tax-free kind of bucket where you can stick money. It can earn interest outside of tax that sounds pretty exciting, except for most individuals in the UK will have between 500 and 1000 pounds of interest they can make without paying any tax anyway. Generally, the ISO rates are lower than a standard interest-bearing account. Hence, you think you’ve got a review whether actually, the ice is an overall better thing for you US accountants can’t give financial advice in that sense but go and check it out, but you can do the maths easily enough.
We mean have a look, but if, you are up against it with that interest allowance you can invest up to twenty thousand pounds in a nicer way this particular tax year is kind of wrap that money up there so that is definitely worth consideration, if you’ve got kids so, if you’ve got child benefit have a look at what’s going on with your child benefit ,if either one of you in that household is earning over 50 000 pounds there’s a chance well there’s not really a chance you’re gonna have to pay back some of this child benefit it’s a really weird one but basically quite often the scenario will be stereotypically that one of you is the primary care giver and not earning that much money if any and then the other one’s earning say sixty thousand pound and the child benefits being received by the lower earner but what happens is the higher earner then has to pay it all back on their tax returns, so bear that in mind and we think you should then be assessing actually for next year and there’s nothing you can do about it now other than knowing, oops I might have to pay some of my child benefit or all of my child benefit back but you want to consider in a future year is it worth having ,but in a lot of cases people will still want to do it because it’s cash flow they get to enjoy the money and then hand it back a lot later so that’s a possibility but do review child benefit situation and then there’s a slightly less exciting one again called marriage allowance and it allows you to transfer some of your if you’re married it allows you to transfer some of your personal allowance so everybody gets like 12 and a half hours a pound or into the new year’s just slightly more than that tax-free you can earn up to that without paying any tax and it’s possible to shift some of your allowances across to the other person but it’s not possible where one of you pays the higher rate attacks so let’s just say when you’re earning over fifty thousand pound and again that’s limits going up slightly in the next tax year ,you can’t do it but generally it’s quite useful ,if say one of you is not earning and the other one or certainly not using all of their allowances and the other half is and they’re not paying over 50 grand getting paid over 50 grand and it will save you up to around 230 pound plus in a tax year but it’s a bit of a weird allowance that you can only transfer sort of all or nothing of this particular amount they give you so you do need to consider whether that’s a good idea you know if you’re only just using under your allowances here it’s not necessarily a good idea to transfer this whole chunk of allowances over here but that’s probably outside the scope of this article but know that it’s possible it’s very easy to apply online, so if one of you clearly is not earning anywhere near 12 and a half thousand and the other one’s earning under 50 000 that’s a very big possibility for you so check that one out marriage allowance in the other unexciting camp but worth talking about there’s two really one is pensions and the other one is gift aid .
Now, if you’re a higher rate taxpayer, so you’re earning over 50 000 then this is really for you, and that’s looking at are you making any charitable donations personally to charities registered charities usually you’ve been asked to fill out a gift aid declaration if you’ve done that make sure you claim that on your tax return and because you would get some tax relief on that on those particular claims if you if you’re a basic rate taxpayer, i.e., you’re earning under 50k it’s not very exciting for that point of view but um there is a box still to put on the tax return if you do one of those at that point um but yeah definitely check that out if you’re a higher rate taxpayer. Then it’s the same with pension contributions; how a lot of pensions work is you get a top-up at the pot, so you contribute personally, and then at this end, the taxman puts in 20 into your pot not always but quite often and in with the suitable pension scheme. Suppose you’re making those contributions, and you’re paying 40 tax in your job, obviously, in theory. In that scenario, you would be able to top that pot up with this extra 20 tax that’s not accounted for, so you do that the way they do that is they don’t top the pot. They give you the tax back. Hence, they give you actual tax relief on your earnings so, if you would have put that into your tax return, the likelihood is if you did that in the first year, you might well get a tax refund directly to you rather than your pension pot. So we think the key takeaway here is if you’re a higher rate taxpayer. You’re making personal pension contributions, and then it’s highly likely that you should be filling that in on your tax return. It could be a good all-round story for you; we know we did a client recently that ended up with a 7 000 pound rebate off this because he didn’t realize that was a thing, so definitely keep that opportunity out and if you’ve got any questions around that to speak to your pension provider speak to any independent financial advisors around and check on the type of scheme you have and whether it’s something you should be doing. Still, there’s a cap of contributions you can make of up to forty thousand pounds each tax year that you can put into a pension and gain this kind of relief.
There are other rules around that, but that’s just the top-level stuff, so check that out if that is you. Now if you’re into the big stuff so you’re into say property or you’re a landlord there’s a couple of things here if you’re a landlord consider doing any repairs and renewals ,you’ve got to do before the fifth of April ,we always think the worst time to repair a property is somewhere in early April just after the tax year because if you did it just before you’re impacting your next tax bill you’re reducing that tax bill um so you never hear me telling you go out and spend money to save tax because it’s a stupid idea at the end of the day most of the time let’s just keep the tax rates easy if you spent 10 grand you might save two so unless you needed to spend the 10 grand there’s not a lot of point so it’s a bit like this if you need to do the repairs and you know you’re gonna need to do it the next few months the other side of April then consider bringing it forward and impacting your tax bill now ,if you think you’re getting rid of any property or shares or bitcoin or all these other things that you might be involved in you get a separate annual allowance called capital gains allowance each year and it moves each year but you know let’s just it’s not far off what the personal allowance is now around 12 000 pound a year and what happened again it moves each year but that is a separate allowance so if you sell some we don’t know some bitcoin and make a 10 grand profit, you’re not going to pay any capital gains tax as it’s known on that because you’ve got this allowance so the worst thing to do is if you’re going to sell and make a profit of say 20k if you’d done 10k profits worth before April and the other 10 after you’re using your 12 grand allowance in one year and your 12 grand allowance in the other year and you’re not paying any tax you’ve sold it all in one tax year for 20 grand profit you’re going to pay tax on like the roughly eight grand profit that’s not covered by the allowance so consider if you are going to sell big chunks for profit maybe splitting them over taxes if you can obviously the property you can’t really split that into two chunks but um you know if you’ve got a couple of properties you’re selling off because you want to get out the market or something selling it across the taxis is also quite useful for you.
Now while we’re on the topic of big stuff if you’re a business owner quite often going back to what we said a minute ago you’re not looking to just randomly spend money to save tax but it’s the same deal if your accounting year so let’s say you’re a sole trader and quite often you as a sole trader your accounting year will run with the tax year so you know you cut off on the fifth of April if that’s you consider the same exact same thing we looking to invest in any they call it like machinery but we looking to invest in new computers tools vans these kind of things if you are there’s a fantastic allowances for buying those currently and of course what will happen then is let’s say at the moment you bought a five grand bit of equipment or you know it’s camera equipment or a drone and you’re into drone photography that’s quite popular at the moment, so you buy those kind of things you get to knock the whole of your five grand off of your profits before you get taxed in one year which is pretty impressive so and it will have a pretty decent effect on your tax bill so do consider that same deal if you’re going to buy in the next few months consider bringing that forward it doesn’t work on things like stock and items that you wouldn’t sell at late in to later date in most cases , just think about plant machinery that’s the technical term but you know the big stuff your computers, your laptops all that kind of stuff that you might refresh consider doing that before the fifth of April, however we would always say that nearly every year but in this sense there is one caveat to this and that is from if you’re a company and you’re thinking of doing this from the first of April there’s a new super deduction that was announced in the budget but instead of giving you that 100 tax relief .
We just mentioned about where you get to knock the whole of the cost off against your tax bill they’ll actually let you knock off the whole cost and another 30 off your profits of the stuff that you buy after April currently at the time recording this only applies to limited companies um so it’s a same sort of deal you know if your company year runs around the tax year now is a good time to be thinking about this however, if you wanted to maximize the actual tax back you would probably wait hell tax relief you would probably wait until the first of April the downside to that is it won’t affect your next tax bill if you imagine the lines drawn at the 5th of April more likely with a limited company it’s going to be drawn on the 31st of march if that’s your year end your next tax bill is impacted by what you’re buying now if you wait to the 1st of April you won’t see the actual benefit until your next tax bill after that it’s quite a way away so is that toss-up between do you want to save some money that you might have to part with soon or do you want to maximize the total amount that you’re saving hopefully we’ve explained that easy enough for you so, that’s the big stuff while we’re on the subject of limited companies let’s talk briefly about salary so just review your salary it’s very normal in the uk to have a very low salary for let’s just say somewhere between eight and a half grand and 12 and a half grand roughly um for you as a director of a limited company and then you might take the rest of your profits in dividends so that overall that ends up being the cheaper option of how to take your money from the company generally now in this particular case especially with furlough being in play and all these other things that might have happened during this year it’s even more important to look back at the year and say am I happy with I’ve used my allowances , if you’ve only got five grand on payroll well you’re going to lose out on a state pension qualifying year because you want to be probably six and a half just say roughly to be safe to make sure that you’ve got your state pension year that’s important to your pension pot later on and you still won’t pay any national insurance on that in that level so that’s really really good or if don’t know let’s say you’ve done seven grand but actually why have you not done eight and a half nine and a half you know 12 and a half used some more of these other limits so do have a look and just think have I maximized it and it is so dependent on your situation, what the best level for you is but we think if you’ve paid yourself less than about eight and a half grand you should be thinking about is there a possibility to maximize that and make an adjustment to like this month’s march payment or pace of a bonus or something like that so just have a look at that and then consider when you move into next year what’s the best thing for me right now.