The end of the 2010 tax year is only 4 weeks away. Now is therefore the ideal time to complete some pre year-end tax planning and also look at some forward planning for 2011.
If you own a business or are self employed some of the planning opportunities that that you should consider are:
1) Have you made full use of your allowance for the purchase of capital equipment? Most businesses receive an ‘Annual Investment Allowance’ each year meaning the first £50,000 of qualifying capital expenditure in the tax year is set fully against ‘profits’ in the year of purchase. Therefore by bringing forward planned capital expenditure you will bring forward the tax relief.
2) If your are likely to make profits from your business this year but have poorly performing shares that could be sold for less then they cost you it may be worth thinking about crystallising the losses on these shares before the end of the tax year. This loss can then be set against the businesses profits.
3) If you operate a limited company have you made use of your tax free personal allowance by paying yourself a salary up to the personal allowance limit?
4) If you operate your business through a company have you reviewed your dividend policy to ensure that you receive your money in the most efficient way? It may be worth looking at transferring some shares in a family company to your spouse. Inter-spouse transfers are exempt from Capital Gains Tax and could result in serious income tax savings.
An additional point to note here is that to minimise the risk of HM Revenue and Customs treating divided payments as salary, and thus attracting a national insurance charge you should ensure that the transaction is correctly recorded in the company’s books and that the appropriate paperwork is in place.
5) Have you reviewed your pension contributions this year to see if there is any scope to make additional contributions? Because of the changes to the top rate of income tax next year the rules on pension contributions are quite complex and proper professional advice should be sought on this subject.
6) If you own a property classified as a ‘Furnished Holiday Letting’ have you looked at how the change in classification to general letting in April 2010 will affect you tax position? It may be worth brining forward any planned capital expenditure on the property so that the expenditure qualifies for capital allowances.
Additionally the relief that you can claim on any holiday lettings losses will also change.
7) Have you reviewed your company car policy? It may be worth looking at taking your car ‘private’ in 2011 and claiming mileage for the business use of the vehicle at 40pence per mile for the first 10,000 miles and 25pence per mile thereafter.
Tax planning should not just be about business owners or the self employed. There are also planning opportunities that individuals can look at such as:
1) Are you making full use of your tax efficient savings allowances – ISA’s?
2) If you have surplus cash that you would like to pass onto your relatives without affecting your Inheritance Tax Position you can make gifts of up to £3,000 per tax year. If you did not made any gifts last year you can double that amount.
3) If you are a higher rate tax payer and your spouse is a basic or lower rate tax payer and you receive bank interest and/or dividends have you thought about transferring the savings or shares into your spouse’s name so that tax is paid at the lowest cost?
I firmly believe that no one should pay more in tax than they legally have to and reviewing just one or two of the points mentioned above could create significant tax savings.
If you own a business or a self employed to ensure that you are doing all you can to minimise your tax burden you should make sure that you have a pre year-end tax planning meeting with your accountant and ensure that all necessary action is taken before the end of the tax year. After then it will probably be too late.
If you would like a FREE review of your tax affairs please contact the office on 01386 49999 or on email@example.com.
This Blog article was written by:
Crump Pearce & Co Ltd
Chartered Certified Accountants
Member since: 10th July 2012
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