When it comes to the tax year, much more emphasis is placed on the end of the year, rather than the beginning. This is understandable as the end of the tax year is full of deadlines, assessments and payments. However, the beginning of the tax year is also important as this is the time to take stock, check your allowances and invest in your business. It can be easy to procrastinate but if you tackle these preparations head on, you can enter the new tax year with peace of mind.
Employee Tax Codes
Employee tax codes are used by businesses to calculate how much tax should be deducted from wages. This code is generated when an employee first starts working with a company but employers should also check that these codes are correct before the start of each tax year. This task should be first on your list, before you make any new payments.
Employment Allowance
Employment allowance can be claimed by eligible employers and allows them to reduce their annual national insurance liability by up to £4000, per year. As this is a yearly allowance, business owners must reapply before the start of each tax year.
Small Employers’ Relief
Small Employers’ Relief allows businesses to claim back some or all of the money they have spent on statutory maternity pay, statutory paternity pay, statutory adoption pay and shared parental pay. Those who are classified as a small employer can reclaim 100% of these payments and those who are not can reclaim up to 92%.
As you enter the new tax year, you should calculate whether you are eligible for Small Employer’s Relief and if so, you can apply using the Employer Payment Summary.
Tax Efficiency
Another aspect to consider as you enter the new tax year is tax efficiency. Rather than tax avoidance or evasion, tax efficiency is a legal way of ensuring that you aren’t paying more than your fair share of tax. This therefore allows you to save more money, which can then be reinvested back into the business.
ISA’s or Individual Savings Accounts allow users to invest money into a savings account, which can then accrue interest. The main benefit of ISA’s for business owners is that any growth from these savings is free from tax. However, there are rules when it comes to using ISAs- for example businesses can only open one of each type of ISA per tax year. Also, if you do have multiple ISAs, you can not invest more than £20,000 across all of your accounts.
Pension contributions is another way that a business can receive tax relief. Basically, the pension contributions that a company makes towards an employee’s plan can be classed as a business expense. This includes both private and company pensions, with an upper annual limit of £40,000. Some business owners may not have been aware that you can claim against pension contributions, fortunately you can bring forward 3 years’ worth of previous allowances.
Charitable donations are becoming more commonplace in the corporate world. How ethical a business is, is much more important for many customers. Therefore, there has been a rise in charitable donations from companies. This obviously benefits the charity but it also benefits the company as these donations are tax deductible and therefore help the business to save money.
The lead up to the new tax year should be a time to invest in your business. Ensuring that you have made all the correct preparations means that the company is in the best position to grow.
