As the 2015/16 tax year starts to draw to a close, now is a good time to think about year-end tax planning.
With less than 7 weeks left in the 2016 tax year, there is still time to make decisions that can reduce your tax liabilities and help your business to grow going forwards.
Equipment
For the self-employed, you are able to claim tax relief on equipment you purchase for the business – in effect reducing the net cost by the tax rate you pay.
It is also important to ensure that you are using the best equipment for your business, so that you also save time and money through greater efficiency and reduced downtime.
Pensions
As the year draws to a close you will almost have a full year of results, so will be able to see how things have gone over the year. If you have had a good year then perhaps you would want to increase your pension contributions.
(There is talk of possible changes to pensions in the next budget, so you may want to take action straight away before then)
Pension contributions attract tax relief at the basic rate through an additional credit made into the pension. For those that pay tax at the higher rate then additional relief is available through the tax return.
ISA
Although you do not receive tax relief on payments made into an ISA, you do receive relief when money is taken out.
With the new ISA annual contributions limits announced a couple of years ago, there is good scope for making use of your annual allowance.
Future tax planning
With nearly a full year’s results available, now is the time to look at the structure of your business before the new tax year starts.
Perhaps engaging additional support could help your business to grow. As a business expense, you will also receive tax relief on this as well.
Tax payments
One other thing to plan for is the expected tax liabilities from your results in the year to 5th April 2016.
Rather than wait several months before completing the return, if you complete it as soon as possible after 5th April then you will know your tax position well in advance. This will avoid any last-minute shocks, and you can also set aside an estimated amount of tax going forwards for 2016/17.
If you have a payment on account due by 31st July 2016 then this can be finalised if the return is prepared before then.
And if you turn out to have a tax refund due, it is much better to have this early rather than wait for several months.