Happy new tax year!
We entered the 2024/25 fiscal year on 6 April and now is the perfect opportunity to take advantage of the allowances, reliefs, and exemptions that your business can claim within the next 12 months.
“These can give you a distinct tax advantage over your competitors and reduce your overall expenses significantly,” says Seymour Taylor’s Director, Liza Rowles.
“The best way to manage and apply for these is through your accountant and tax adviser – we can streamline the process considerably and guide you on which ones to apply for and when.”
However, if you are yet to engage an accountant, here are some of the many options we’ll be advising clients on this year.
The VAT registration threshold has increased
The threshold for VAT has risen from £85,000 to £90,000 this year as part of the Chancellor’s attempt to support small businesses in the Spring Budget.
“This change will simplify your tax compliance and may mean that you can defer your VAT registration,” says Liza.
“You may need to reassess your growth strategies in light of the new threshold and strategically plan for when you register for VAT as a result.”
Registering for VAT before your profits reach the threshold can allow you to reclaim VAT on your business expenses, enhancing your cash flow and presenting your business as more established to potential clients and suppliers.
Business investment advice
The Annual Investment Allowance, which remains at £1 million this year, enables you to immediately deduct the cost of assets from your profits.
“This is especially valuable if you’re investing in plant and machinery, as it allows for a full deduction in the year of purchase, effectively reducing your taxable profit.”
Additionally, “it encourages you to accelerate your investment plans, promoting growth and innovation within your business,” says Liza.
Equally, R&D tax relief can help you promote innovation, reducing your taxable profits, but it is important to be aware of the merged schemes that are now in place.
The combined scheme of R&D Expenditure Credit (RDEC) and Enhanced R&D Intensive Support (ERIS) supersedes the previous RDEC and Small and Medium-Sized Enterprise (SME) schemes.
While the rules for expenditures under both schemes remain the same, their calculations will differ.
Similarly, looking into this tax year (2024/25), investments in digital and green technologies may offer future tax benefits and allow you to claim Enhanced Capital Allowances against your profits.”
A note on salaries, bonuses, and dividends
“Balancing remuneration types can significantly reduce your tax burdens, with the NIC reduction from 6 April affecting optimal salary and dividend structuring.
“Dividends are likely to offer the greatest tax efficiency post-NIC threshold, enhancing take-home pay,” says Liza.
As with all other forms of remuneration, it’s best to discuss this with your accountant or payroll specialist before you proceed.
Compliance considerations this tax year
The changes made to the Making Tax Digital scheme in the Spring Budget mean that all unincorporated businesses will need to submit digital records and quarterly submissions when their income exceeds £10,000.
Liza says: “Basis period reform will also align business income assessment with the tax year and increase your need for comprehensive reporting and documentation procedures.
“In 2024/25, properly transitioning and understanding these new compliance requirements is going to be crucial for businesses.”
Is this the year for incorporation?
“Incorporating – becoming a limited company – can lead to lower Corporation Tax rates and flexible tax planning and many of our clients are now considering this as a tax mitigation strategy.
“This is a great way for sole traders and partners to reduce their Income Tax liabilities by paying Corporation Tax instead,” says Liza.
Managing dividends and salaries within a limited company also further optimises your tax liabilities.
Speaking to your accountant
The best way to reduce your expenses this tax year, and remain compliant throughout, is to speak to your accountant at the earliest opportunity.
We can help you reduce your tax liabilities and plan efficiently for the year ahead.
If you require support with corporate tax planning, please get in touch with your Seymour Taylor representative or contact us on enquiries@stca.co.uk 01494 552100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at time of publishing on 15 April 2024.