How to prepare for the new tax year
Last updated on Wednesday, March 29, 2017
The UK tax year runs from 6th April to 5th April the following year, which means the new tax year of 2017/18 is starting soon on Thursday 6th April. As a contractor and businessperson, there are things you can do to prepare for the new tax year and set yourself up for success.
When you are set up as a limited company, the dates of the financial year are significant for you as your tax returns will reflect these dates.
As the start of the 2017/18 tax year approaches, there are some things you can do to make sure your business is in order.
Discuss tax planning with your accountant
The new tax year will bring a new opportunity for you to explore ways to maximise your take home pay further. It’s important to discuss tax planning with your accountant to ensure you can (legally) yield a higher take home pay.
- Set salary: In many cases, operating a set salary through your company for the entire tax year will help your accountant advise you on the best ways to minimise your tax burden. The good news is that come 6th April, your personal allowance for salary income will rise from £11,000 to £11,500 for basic rate income, and the higher rate threshold is increasing to £45,000, giving you an additional tax saving.
- Dividends: Another tax planning measure to have in place before the start of the new tax year is your company’s dividend strategy, for each time you draw dividends. You can choose the dividend amount you wish to take, but your accountant can help you decide the ideal dividend amount for you to withdraw from your company by explaining the process to you, taking into account the tax-free dividend allowance of £5,000. Your dividend strategy could include drawing out all the dividends you can, or it may involve leaving a certain amount in your business bank account until it is needed.
- VAT Flat Rate Scheme (FRS): If you are registered on the FRS, you will also need to discuss with your accountant whether it will be beneficial for you to continue to remain on the scheme, as the common rate of 14.5%, which many businesses fall under, is rising to 16.5% on 1st April, effectively removing the financial benefit of the FRS for many.
These are important things for you to address with your accountant as it could set the tone for yours and your company’s financial condition for the year.
You may also choose to seek the advice of an Independent Financial Advisor who can discuss savings and investment strategies that would particularly suit you as a contractor with a limited company.
Things like making additional contributions to your private pension, setting up ISA savings accounts, taking advantage of the marriage allowance and other strategic moves can help ensure that your business is tax efficient.
There are qualified advisers who specialise in the contracting industry and can help you with financial services that will best suit you, your business and your lifestyle. One of these is Contractor Financials, who offer advice on mortgages, pensions, insurance and savings.
There are many ways to prepare for the new tax year, but if you have a specialist contractor accountant the effort is usually handled by them, whilst providing you with the utmost advice and support so you don’t have to bother with administration and paperwork.
Contact us for more information on receiving free contractor tax planning services from a specialist accountant.
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