How to Plan for Your Year-End Taxes

Feb 10, 2023 | Tax

As we draw closer to the new tax year, it’s time to start thinking about getting your affairs in order.

While it can seem cumbersome, the earlier you start, the better. No matter the tax, preparation is key.

This article will act as a guide if you are unsure of the best ways to plan for your year-end taxes strategically.

Plan carefully

Now that self-assessment season is over for self-employed workers, you will have to start thinking about planning your upcoming payments.

Remember, everyone gets a personal allowance of tax-free income of £12,570. If you earn up to £50,271, you will pay the basic rate of 20% on your earnings.

Any income between £50,271 and £125,140 will be taxed at 40%, and anything over £125,140 will be taxed at the additional rate of 45%.

If you are a company director, you can lower your income tax bill by paying yourself through a mix of salary and dividends. This is because dividends are taxed differently to salaried income.

The new rates of dividend tax for 2023 are:

  • basic rate: 8.75%
  • higher rate: 33.75%
  • additional rate: 39.35%.

Currently, the tax-free dividend allowance is still £2,000, meaning only the dividends you receive over this amount will be taxed. From April, this will halve to £1,000, and then again to £500 from April 2024.

For VAT-registered businesses, you will have to submit quarterly reports to HMRC through Making Tax Digital-compatible software. With VAT, it is essential to know which scheme to be part of so you are charging and paying the right amount.

Make the most of your tax reliefs

By getting ahead of your taxes before the year-end, you will be able to make the most out of any potential tax reliefs you could be eligible for, including any business expenses you have accrued throughout the year.

If you decide to pay more into your pension, you can claim further tax relief on your contributions.

You can claim tax relief on private pension contributions up to 100% of your annual earnings; this will happen automatically if your employer deducts your pension contributions at source.

Unfortunately, you cannot claim tax relief if you’re self-employed. Your pension scheme isn’t registered with HMRC, so any relief must be claimed through your self-assessment tax return.

Also, if you run a limited company, make the most of your annual investment allowance. This allows investment into capital assets for ongoing use within the business and the tax relief is given in the year of purchase.

Find ways to save money

Making minor errors or missing your tax deadline can result in an automatic £100 penalty from HMRC. This is why ensuring your returns are correct and filed punctually is essential.

By getting an early start on your tax returns, you will be able to focus on minimising any room for error. The last thing you want is to incur fines from HMRC for underpaying your taxes or even missing your deadlines.

Get in touch

There is no time like the present to get a start on your tax returns, it may be easy to procrastinate, you will save a lot of stress by striking while the iron is hot.

We have helped countless clients with their tax returns over the years, so we’ll happily be there to help you too.

Contact our team to discuss your upcoming tax returns.

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