Most tax work happens after the year has ended, when the figures are fixed and the only question left is what you owe. Tax planning is the opposite: looking at your position while decisions can still change the outcome.
It is not aggressive schemes or anything exotic. It is using the allowances and reliefs you are entitled to, and getting the timing right.
What this covers
- The balance between salary and dividends for director-shareholders
- Timing of capital purchases and available allowances
- Pension contributions as a deductible cost
- Use of available allowances before they are lost at the year end
- Planning for Corporation Tax and personal tax together rather than separately
- Whether your current structure still suits the business
Timing is most of it
Once your accounting period closes, the Corporation Tax figure is largely set. Most legitimate planning has to happen before that point, which is why an annual conversation held after the year end is usually too late to be worth much.
We would rather look at the position with a few months still to run, when choices are still available.
Company and personal are one question
For an owner-managed business, Corporation Tax and your own Income Tax are not separate problems. How you take money out determines both.
Profit, distributable reserves and the cash you can personally take are three different numbers — we explain why in can you take £40,000 out? Getting that wrong creates an overdrawn Director’s Loan Account, which brings a Section 455 charge and possible benefit-in-kind consequences.
For sole traders
If you are self-employed, planning is less about structure and more about knowing what is coming. The January bill catches people out because it can include the year just gone plus a payment on account towards the next — see the tax bill isn’t the problem, the surprise is.
Knowing your likely liability in September rather than January is most of the battle.
What this is not
We do not promote contrived arrangements or anything that relies on HMRC not looking closely. Beyond the obvious risk, those schemes tend to cost more than they save once the dust settles.
Straightforward planning, applied consistently and early, is worth considerably more than anything clever.
Common questions
When should we have this conversation?
Ideally two to three months before your year end, when there is still time to act on anything. A conversation after the year has closed is mostly a report on what has already happened.
Is there a minimum size for this to be worthwhile?
Not really, but the value scales with profit. For a company making modest profits the decisions are straightforward. As profits grow, the gap between a planned and an unplanned approach widens considerably.
Will you suggest anything aggressive?
No. We work with the allowances and reliefs the rules provide. Contrived arrangements tend to unravel, and the cost of defending one usually exceeds anything it saved.
Does this cover personal tax too?
For owner-managed businesses it has to. How you take money out of the company determines both the company’s tax and yours, so looking at either in isolation gives you the wrong answer.
Book a consultation to talk through your position.
Tax rates, allowances and reliefs change, and what applies depends entirely on your circumstances. Nothing here is advice for your situation.