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Tax planning for a prosperous future

Effective business and personal tax planning can help to ensure a secure financial future for you and your business. Here we highlight some strategies to consider when reviewing your financial plans.

Business strategies

Is your business motoring as tax-efficient as it could be?

An employer-provided vehicle can be a useful business tool for both employees and employers. However, with the taxable benefits on cars increasing year on year, it may be time to review your business motoring policy completely. In some cases, it could be more tax-efficient to pay employees for business mileage in their own vehicles at the statutory mileage rates, especially if their business mileage is high. A company van may also be worth considering in certain circumstances – please talk to us about the potential tax benefits.

Are you claiming all the relevant allowances, deductions and expenses?

Have you checked to make sure that your business is claiming all the allowances that it is entitled to? Businesses looking to purchase capital equipment are able to claim tax relief in the form of capital allowances. The majority of businesses are able to claim a 100% Annual Investment Allowance (AIA) on the first £200,000 of expenditure on most types of plant and machinery (except cars). Meanwhile, those who are self-employed may be able to claim for allowable expenses such as office costs, travel costs, clothing expenditure and more. Please speak to us for further details.

Have you considered the tax benefits of taking dividends rather than a salary/bonus?

If you are an owner-director, you may wish to take dividends instead of a salary/bonus. Despite changes to the dividends regime in 2016, receiving dividends rather than a salary/bonus may still result in a lower national insurance contributions (NIC) liability. The Dividend Tax Allowance (DTA) is currently £5,000 for 2017/18. The allowance does not change the amount of income that is brought into the income tax computation, but it instead charges £5,000 of dividend income at 0% tax – the dividend nil rate. Please note that proposals have been announced to reduce the DTA to £2,000 from April 2018.

Personal strategies

Have you sought to minimise your liability to income tax?

You may be able to minimise your income tax liability by making full use of your personal allowance (PA), which is set at £11,500 for 2017/18. If a spouse or partner has little or no income, consider transferring income (or income-producing assets) to them to ensure that they are able to make full use of their PA. Certain rules and restrictions apply so please speak to us before taking action.

Are you investing in a pension?

Investing in a company or personal pension scheme may afford tax breaks on your personal pension contributions, while helping to ensure that you plan for a comfortable retirement. If you are a higher rate taxpayer, your investment will, subject to limits, qualify for tax relief at 40%. Pension contributions can be made at up to 100% of relevant earnings, subject to the annual allowance, which is currently £40,000 for most people. However, those with adjusted income over £150,000 may have their annual allowance tapered down to a minimum of £10,000.

Are you making use of tax-efficient investment opportunities?

A number of investment products offer tax-free income, including Individual Savings Accounts (ISAs) and some National Savings products. You may also wish to make investments under the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS), via a Venture Capital Trust (VCT) or using Social Investment Tax Relief (SITR). However, it is important to consider the potential risks as well as the benefits, and we recommend that you speak to a qualified adviser before taking action.

As your accountants, we can help you to implement effective tax planning strategies. For more information, please do not hesitate to contact us.