As we near the end of the 2018/19 tax year, now is the time to review your finances to ensure they’re structured as efficiently as possible. Here are a few reminders to help you maximise your finances through efficient tax planning.
First of all, review your current business structure. Circumstances change and your current structure
might not always be the most efficient. We recently advised a partnership that had experienced rapid growth on switching to a limited company structure, guiding them through the incorporation process. The tax planning opportunities available to company directors mean that you can draw a salary according to your needs, leaving the rest of the profits in the business, which in the case mentioned above, will result in a significant future tax saving.
If you’re already a limited company owner, you might want to consider splitting your shareholding. Transfers of assets between spouses are exempt from capital gains tax, so depending on your circumstances, it could be beneficial to restructure your business, by introducing A&B shares, for example.
From our experience, public perception on pensions are mixed. However pension payments receive very favourable tax advantages, so be sure not to miss out on the tax relief available. You can currently invest up to £40,000 tax-free into your pension pot each tax year, with the option of carrying over unused allowance from the previous three tax years. Those with high incomes receive a reduced (tapered) annual allowance. As always, we’d advise you get in touch with your tax advisor before making any significant investments.
Make the most of tax incentives by using the SEIS and EIS scheme for investments. The Enterprise Investment Scheme (EIS) provides income tax and capital gains tax relief to those who invest in smaller, unlisted companies. The Seed Enterprise Investment Scheme (SEIS) offers tax incentives to people who invest in new companies, which carry out a qualifying trade.
Finally, business owners should take time to reflect on their performance and take stock of the financial year so far. With the Annual Investment Allowance temporarily increased to £1m, for some businesses it will be worthwhile to bring forwards any capital purchases to take full advantage of the increased year one allowance.
For more information, contact your local Champion Accountants practice in Manchester, Chester, Blackpool or Preston.