End of the tax year checklist

The end of the tax year is fast approaching so I thought I’d put together a bit of a checklist of things to look at before the 5th of April!

Dividends

If you are a director of a limited company you’ll know you can take money out of the company in the form of dividends. Currently, the tax-free amount is £2k – this is going down to £1k from the end of the tax year so if you haven’t already taken £2k dividends now would be the time to do it.

Watch out though – dividends can only be taken if you have enough distributable profits in the company. If you aren’t sure double check with your accountant.

Dividends are taxed on the date they are declared and not paid so make sure you have all the relevant paperwork (board minutes, dividend voucher etc) dated before the end of the tax year to back up the Dividend amount.

Pension

If your self employed or a limited company director now is a good time to look at how much you’ve paid into your pension this year. You can usually pay £40k into a pension a year tax-free, so if you’re looking for other ways to take money out of the business without being taxed, a pension is a good option.

ISA’s

Use up your annual ISA allowance which is £20k per year for 22/23 tax year. As we’ve been in a period of low-interest rates for a while you may not realise that you get taxed on interest income. Interest earnt in a normal bank account is taxable, it’s not been talked about much because the interest earnt has been so low it’s been hard for it to go over the tax-free thresholds but as interest rates rise this will become more relevant. ISA’s are a great way to earn interest as the interest is tax-free but you can only put so much in a year.

Salary

If you are a limited company director you may also be taking a salary from the company. Make sure between salary and dividends you’re using up your tax-free allowances in the most tax-efficient way for your circumstances before the end of the tax year. Have a chat with an accountant if you’re not sure about this.

Capital Allowances Super Deduction

Again this is only available for limited companies but the end of the super deduction which enables you to claim 130% back on capital items is coming to an end on the 31st of March 2023. Want to know more – go check out last week’s blog on this.

Think about your expenses before the end of the tax year

For sole traders, expenses incurred wholly and exclusively for business purposes can be deducted from your income to produce a trading profit. The lower the taxable profit the less tax you will pay.

If you’ve been thinking about paying for anything business related such as stationery, postage, marketing etc then try and order this before the end of the tax year. This way, you will get the benefit of tax relief immediately (effectively one year earlier).

But don’t buy things just to save tax! Make sure there is a genuine business reason behind it or you’ll end up wasting more money than your saving.

Get your accounts in order for the end of the tax year

Get your bookkeeping up to date, find all those receipts and file them. Trust me it’s a lot easier to do it now whilst it’s fresh in your brain than on Jan 31st 2024 in a panic.

Give yourself a goal to get your tax return submitted in the next couple of months. Ideally by the end of June. The reason I say this is that if you are on Payment on Account with HMRC you’ll have another tax payment due in July. If you haven’t submitted your self-assessment by then they’ll be using last year’s numbers to guess what your tax this year might be.

Now if you had a bumper year last year this could mean you end up paying HMRC too much cash and then don’t get it back until Jan which let’s face it as a small business owner is really less than ideal.

So find an accountability buddy and get it done!

Discovery calls are now open if you want to work with me on all things finance and tax next tax year!