2023 Year-End Tax Planning: A Guide for Business Owners

As the end of the year approaches, business owners need to start thinking about their year-end tax planning. This is the perfect time to get your affairs in order and ensure you’re on track to save on your tax bill. In this guide, we’ll provide you with tips and strategies to help you save on your taxes. We’ll also cover what you need to know about accounts and tax returns and when to start thinking about your year-end tax planning. By the end of this guide, you should understand what you need to do to reduce your tax liability. This is an update to our Personal Tax Planning in 2021/22 article.

What do we mean by year-end tax planning?

Year-end tax planning is reviewing your financial situation and identifying opportunities to minimize the amount of tax you pay. This includes assessing your available reliefs and allowances for earnings, income, savings, and investments and ensuring you take advantage of them before they are reset at the end of the tax year. Understanding your options and making the most of them is essential, as there may be some carry-forward opportunities you are unaware of. Our financial planning and tax advisers can help you assess your position and determine the best tax planning strategies for your situation.

13 Tips for Year-End Tax Planning

1.    Get organized: Ensure all your paperwork is in order and filed correctly. This includes keeping track of receipts and documentation for deductions and credits.

2. Use tax breaks: Businesses can access a range of tax breaks and credits that significantly reduce their taxable income. Research these options thoroughly before year-end to ensure you take advantage of all the available benefits. Check our guide to capital allowances.

3.    Plan for changes: Keep an eye on any changes to tax laws or rates that could affect your business. For example, the UK’s had three Budgets in 2022, which introduced several changes to tax rates and allowances that could impact your tax bill.

4.    Review your business structure: Consider whether your current business structure is the most tax-efficient option. For example, if you’re a sole trader, you may be able to save on taxes by incorporating your business. This is because income tax on dividends is usually less than income tax on self-employed income.

5.    Defer income: If you’re expecting a large income in the next tax year, you may be able to defer some of it until after year-end to reduce your current tax liability. But see point 13 below.

6.    Accelerate deductions: If you have expenses that can be deducted in the current tax year, consider paying them before year-end to reduce your taxable income.

7.    Make charitable donations: Donating to a registered charity gives you tax relief and can reduce your taxable income. Consider donating before year-end to take advantage of this tax benefit and use this valuable allowance.

8.    Review your pension contributions: If you’re self-employed or a business owner, you can claim a tax deduction for pension contributions. Review your options before year-end to ensure you take advantage of all available benefits. You have an annual allowance of up to £40,000. This runs to 5 April each year.

9.    Consider tax-efficient investments: As part of your financial planning, some investments, such as ISAs and pensions, offer tax benefits that can help reduce your tax liability. Consider investing in these types of accounts before the fiscal year-end of 5th April.

10.  Seek expert advice: If you’re unsure about your year-end tax planning, it’s worth seeking expert advice from a professional accountant or tax adviser. They can help you understand your options and develop a tax planning strategy tailored to your situation. We are experts at year end income tax, capital gains tax (CGT), and inheritance tax (IHT) planning.

11 Consider employing your spouse to maximise their personal allowance, or if they pay tax at the basic rate. You may be able to transfer some of your income at a higher rate to reduce your UK tax burden.

12 Make sure you claim any exemption, such as the £1,000 per annum tax-free trading allowance.

13 The UK corporation tax rate will increase from 19% to 25% from 1 April 2023. And so, if possible, you may wish to accelerate your income, which is the opposite of point 5. This highlights the need for bespoke tailored advice from a UK tax expert.

Basics of Accounts and Tax Returns

If you’re a business owner, you’ll need to keep accurate records of your income and expenses throughout the year to file your tax return accurately. This includes keeping receipts and documentation for all your business-related expenses. You’ll also need to keep track of your sales and income, including any money you receive from customers or clients.

The deadline for filing your tax return in the UK is 31st January of the following year. However, if you’re trading via a company or LLLP, you must file your tax return and pay the corporation tax within nine months of the year. It’s essential to file your tax return on time to avoid late filing penalties and interest.

When Should You Start Thinking About Year-End Tax Planning?

The sooner you start thinking about your year-end tax planning, the more time you’ll have to review your options and make any necessary changes. This is especially important if you’re considering making significant changes to your business, such as incorporating or changing your business structure. It’s also a good idea to start thinking about your tax planning early if you’re expecting a large income in the next tax year, as this could impact your tax liability.
Generally, it’s a good idea to start thinking about your year-end tax planning at least a few months before the end of the tax year. This will give you enough time to review your options and make necessary changes. If you’re unsure about your tax planning or have any questions, it’s worth seeking expert advice from a professional accountant or tax adviser. They can help you understand your options and develop a tax planning strategy tailored to your situation.

Conclusion

Year-end tax planning is essential for business owners to ensure they’re paying the minimum tax possible. By getting organized, using tax breaks, planning for changes, and seeking expert advice, you can develop a tax planning strategy to help you save on your tax bill. Start thinking about your year-end tax planning early to give yourself plenty of time to review your options and make any necessary changes. Get in touch with us using the form below to see how you can save tax.