Friday 6th March 2009 Blog

The Bookcert Mentoring Teams Top 10 Year End Tax Planning Tips

Sunday 5 April 2009 is the last day of the current tax year, and you will notice that many of your small businesses bookkeeping clients choose either 5 April or 31 March as the end of their accounting year. Tax planning is key at this time of year for your clients, as action often needs to be taken before the end of the tax year or before the end of the accounting year.

These are our top ten tips for action in March:

1. Total up your clients gross income for 2008/09.

If this sum is over £40,835 they will pay tax at 40% on any excess, subject to extra tax relief for pension or charitable gifts. They may need to reduce the gross dividends they take from their company, if they don't want to start paying higher rate tax. Where possible try to ensure your clients use up their full basic rate allowance.

2. Buy a new company car.

Company cars with CO2 emissions of over 160g/km will attract less tax relief from 1 April 2009 (for unincorporated businesses it is 6th April 2009), so your client may want to acquire any new cars in this category before that date. Your client will also accelerate capital allowances for all plant and machinery by purchasing before their accounts year end.

3. End the accounting period early.

If your clients unincorporated business is currently making a loss, they will be able to set that loss against profits made up to three years ago if the accounting period ends before 6 April 2009. This is subject to a limit of £50,000 to the earlier 2 years but unlimited for the first year.

4. Make pension contributions to get tax relief of up to 40%.

Even pension contributions for children of £3600 (gross) can me made which will only cost £2808.

5. Realise capital losses by selling the investment to cover any capital gains above the annual exemption limit.

Some can even be set against income. It could be bought back by your client if they wait 30 days or perhaps use an alternative vehicle to buy it back immediately.

6. Use up the ISA annual investment allowance of £7200 for tax free investing.

7. Use up the capital gains annual exemption by realising investments to use it up. 

Transfers between spouses are tax free and if planned properly can allow use of two annual exemptions.

8. Consider other investment based tax reliefs.

These include investments such as the Enterprise Investment Scheme and Venture Capital Trusts which can give substantial amounts of tax relief.

9. Work out your clients company's marginal corporation tax rate.

This could be as high as 29.75% where profits are over £300,000 or your client and their spouse control several companies. Making a payment into their company pension scheme before the company's year end could reduce that marginal tax rate.

10. Pay NICs due for past years.

You can normally only pay past NI contributions for the previous 6 tax years, but some people are able to pay for earlier years if the payment is made before 6 April 2009. The rate of voluntary contributions increases to £12.05 from £8.10 per week on 6 April 2009, so it's worth your client making these contributions before then if they need to.

Posted by: Bookcert Mentoring Team

Friday 6th March 2009

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