Spring is officially here. The daffodils have sprung, the nights are getting lighter and Derbyshire was blessed with a big dose of glorious sunshine last weekend after what feels like an eternal winter.
Spring also means that the tax year end is fast approaching – and so it’s time to get your ducks in a row and plan the next 12 months of business and make any last-minute changes to the 2021/22 tax year.
Now you may have already sorted this tax year out and, if so, hats off to you for being proactive!
You may have already bottomed out and got your pensions, dividends and salary split right, and you’re making sure that you’re making the most of the final rates of dividend taxes before the health and social care levy falls from 6 April this year. If not, you still have time.
For me, it’s not necessarily about the money that you earn (although that helps with mortgage applications, so don’t always let tax wag the dog) it’s about the money you keep; efficient tax planning is the reason why tax really doesn’t have to be taxing.
So, we wanted to share some tax extraction plans that I have in the pipeline.
As a business owner, dividends are a great way of remunerating ourselves and they’re going up next year, so make hay while the sun shines.
If you can, bring them in a little earlier, especially if you have your books in order and you have your forecasts to hand.
If you’ve been considering how the heck you get your money earning some interest now that the bank’s interest rate is negligible, an option may be to loan the money to your business and pay yourself a commercial rate of interest.
Make use of that £1,000 savings allowance (£500 if you’re a higher-rate tax payer).
Our growing Vibrant team have just moved office to The Mill, in Lodge Lane, and we were even (hypothetically) talking to the landlord about future options to put this amazing place, which has so much history, into our pension scheme.
The dream is clearly a long way off but with regards to office premises, if you’re still in them and not working from home permanently, then this works out to be a nice little arrangement, which ensures that guaranteed rent is paid back into your pension, tax free.
Caring for the planet is important to us here at Vibrant and while I’m not a car fanatic, I’m into being more eco-friendly, so I’m pulling out all the stops and investing in an electric vehicle.
We get 100% corporation tax relief against profits in that year, plus there’s only a 2% benefit in kind on me – so it’s a super tax way of extracting money from the business in a tax effective way (when it arrives in the new tax year!).
The extra running costs of a company owned car should be considered, too; and you can take advantage of tax relief through your business, so that you can claim back the costs of charging your vehicle, tax and car insurance (where done correctly).
If the office is within walking or cycling distance – and you want to keep your New Year’s resolutions to keep fit – then look into a salary sacrifice or cycle to work scheme for staff.
Or just an outright purchase of a road bike, although I should probably dust off the beauty of a bike that is gathering dust in my shed!
Speaking of helping the environment, Derby City Council has a DE-Carbonise programme available to business premises within their boundaries – as long as they meet the definition of small to medium enterprises.
The scheme could help to reduce your energy use (and therefore bills) and also save carbon – win-win!
Running a business takes hard work, grit and determination. It can be difficult to switch off because you’re always working.
That’s why, for me, it is vital to maximise business expenses wherever possible.
Claim back travel expenses on trains, flights and those mileage allowances when travelling for business.
Also, subsistence expenses when eating and drinking when you’re out on business, too.
I also try to ensure I can double bubble the benefits by spending on a points reward card.
AMEX connect their rewards system to Airmiles, which is great especially now that we can travel again!
In the future, I’d love to explore a family investment company and other property rentals.
For me, this is about retention of earning for me, my family and the business. Now who said tax was taxing?!
Moving away from extraction, and ways to look at some key tax planning opportunities in your business, a common question is people asking whether they should be making business expenditure before the April 5.
This timing is only relevant to your year-end, so you should consider buying plant and machinery to take advantage of the £1 million Annual Investment Allowance (AIA), which is now here until March 31, 2023 (where it falls back to £200,000).
This provides a 100% tax write-off for new and second-hand equipment that is used in your business.
Also, the Spring Budget 2021 brought the super-deduction, which gives us an enhance rate of relief of 130% for costs such as computers, office chairs and desks, lorries, vans, drills and cranes etc.
Another, tax planning opportunity that isn’t considered often, as people automatically consider white lab coats and goggles, is Research and Development.
If you’re a UK company, in any industry, and you’ve made some changes to a process or a product, and it wasn’t easy to do, and importantly you’ve incurred costs on employees, contractors, software or materials, then it may well be likely you have a qualifying R&D claim. Timing is key too.
Last year, we saw the Government push new initiatives such as the introduction of UK-wide Freeports, which benefits businesses right here in the East Midlands.
If you are local to East Midlands Airport, or one of the other seven new Freeports, which have been revealed then incentives to trade in the area, including tax breaks and special tax rules, are great for business.
Including enhanced capital allowances, relief from stamp duty and employer national insurance, plus benefiting from a range of customs measures.
Please remember if you’re working in hospitality, then be aware of changes coming from April 1.
During the coronavirus pandemic, Chancellor Rishi Sunak announced a reduction in rates of VAT for the leisure and hospitality sector.
The Chancellor announced his Spring budget on Wednesday – and we have been providing updates on our social media channels and in our company blog – of course, we’re always happy to chat tax matters over a cuppa in our new offices!