Post-lockdown it seems we are all busier than ever, keeping up to date with daily tasks, responding to communication and liaising with staff, clients and customers, but even while extremely busy, it’s still vitally important to consider tax planning not only from a personal point of view but from a business perspective too.
Looking back at the 2021 Spring Budget, with regards to Personal Tax Planning (see Budget 2021 – Analysis from Lambert Chapman LLP (Income Tax and NI) where possible, it’s essential to utilise personal allowances, using up basic rate band and paying dividends of at least £2,000 for each shareholder. Employees should also, where appropriate, be claiming tax relief for working at home due to Coronavirus.
If during the last 18 months it has been difficult to declare any remuneration, but instead drawings have been taken from the company due to funds being available in the bank (Bounce Back Loan for example), this may have resulted in the directors loan account now being overdrawn and so it’s essential that planning is considered to rectify this balance so it’s cleared.
With regards to Business Tax Planning (see Budget 2021 – Analysis from Lambert Chapman LLP (Business Tax Part 1: Corporation Tax) the Corporation tax rate was expected to be reduced further than the current 19% rate but again, due Coronavirus, it was announced the main rate is to be increased to 25% from 1 April 2023. The small profit rates remain at 19% for profits up to £50k, the main rate starting from profits of £250k.
Achieving a profit is normally the main business objective, if profits can be achieved while Corporation Tax remains low, this would normally only be achieved through tax planning considerations (see Budget 2021 – Analysis from Lambert Chapman LLP (Business Tax Part 2 – Capital Allowances).
Electric cars are still excellent for business tax planning, obtaining first year allowances on the purchase price and the taxable benefit in kind is still very low, review of the vehicle mileage range and CO2 emissions is essential and if the vehicle can be purchased or leased by the company should also be considered.
Other Capital Allowances incentives to consider would be utilising the current super-deduction, for 2 years commencing 01/04/2021 for majority of purchased plant and machinery would qualify for 130% capital allowance.
With any tax planning it’s essential to document the payments made and ensure these are made in the appropriate tax year. Dividends declared must have appropriate Minutes and Vouchers, vehicle ownership documents need to be in the name of the business and before any capital purchases are made – ensure that the business can actually afford the asset or the monthly lease/HP payments.
If the above is of interest then please do take a look at our budget videos. If you have any specific questions or concerns then please give us a call and we would be happy to discuss with you.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.