Year-end checklists – Things to consider

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Year end is an important point for a company and an opportunity to finalise finances and tie up any loose ends to benefit from any available allowances or tax breaks.  So, it’s important to consider the company’s, and your personal position, before the last day of the year.

Pensions

If you do not already have a pension, now may be a good time to consider one. Using your company to plan for your future is worth considering as payments towards a pension will reduce your corporation tax by 19% of the contribution made. So, if the company has cash going spare it may be a good option.

A simple example is: –

Company Profits    £100,000

Corporation Tax        £19,000

Dividends Available    £81,000

If you decide to make a £10,000 one off pension contribution this will change to: 

Company Profits    £90,000

Corporation Tax        £17,100

Dividends Available    £72,900

In this example, if you’ve already taken £70,000 in dividends and do not intend to take any further, this situation is perfect.  However, if you do plan to take more, or have taken out £80,000 already, you won’t be able to make a pension payment due to insufficient profits unless your company as reserves from previous years.

Asset Purchases

The timing of the purchase of an asset will directly affect the timing of the tax saving. For example, If your year end is 31st March 2020 and you purchase equipment costing £3,000 on the 28th March, it will reduce the Corporation Tax due on or before 31st December 2020.  However, if you incur the cost a few days later and after the year end, it will reduce the Corporation Tax due on or before 31st December 2021 – a whole year later!

There is no point buying something you don’t need to simply reduce your tax by 19% so make sure that you have thought about what you need in advance and plan accordingly!

Accounts & Bank Statements

To consider investing into a pension scheme or checking cashflow to allow a purchase of an asset, you will need to ensure the company accounts are up to date.
Are all invoices entered to date?

Do you need to chase up payment of outstanding invoices?

Have you added in all your expenses?

What about mileage claims?

Make sure you consider these before year end to maximise you tax position for the year.

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