Is Your Business Paying More Tax Than It Needs To?
The bigger problem for many business owners isn't necessarily the amount of tax they pay but how much they owe when the bill has already arrived.
By then, it's too late to start thinking about what you could have done differently. That's why tax planning is worth thinking about throughout the year, rather than leaving everything until your tax return is due.
Tax planning is not the same as avoiding tax
Tax planning is about making sure you understand your tax position and take advantage of legitimate allowances, reliefs and opportunities that may be available to you.
Importantly, it's about doing that before the relevant deadline.
Do you know what your next tax bill is likely to be?
This is a surprisingly useful question. If you don't have a rough idea of what you're likely to owe, it can be difficult to plan your finances properly.
You might look at your business bank account and think there's plenty of money there. Yet, if a large proportion of it is going to HMRC, that money isn't really available to spend.
Knowing what's coming gives you time to prepare.
Tax planning can be particularly important when circumstances change
Your tax position isn't necessarily going to look the same every year. It could be that:
Your profits have increased significantly
You've taken on employees
You're buying equipment
You're investing back into the business
You're changing how you take money from the company
You're thinking about selling or restructuring the business
These sorts of decisions can have tax implications. That's why tax shouldn't be something you think about once a year, when your accountant sends you the accounts.
If you start thinking about your tax position early enough, there's more opportunity to consider what's available and make decisions with the tax implications in mind.
Leaving it until the last minute can limit your options
One of the biggest problems with leaving tax planning until the tax return is being prepared is that some decisions may already have been made.
If you start thinking about your tax position early enough, there's more opportunity to consider what's available and make decisions with the tax implications in mind.
However, that doesn't mean trying to reduce every tax bill as much as possible. After all, sometimes paying more tax simply means the business has had a particularly good year.
The important thing is knowing why you're paying it and knowing that you've considered the options available to you.
Your accountant should be talking to you about your business tax planning. Do they?
Tax is one of the main reasons businesses have accountants in the first place.
So we don't think the conversation should start with: "Here's your tax bill."
It should start much earlier.
At Culverhouse & Co, we help businesses understand their tax position and consider legitimate tax planning opportunities as part of the wider picture. That might mean looking at your business profits, your cash flow, planned investments or decisions you're considering making.
If you don't know what your next tax bill is likely to look like, or you're not sure whether you're making the most of the options available to you, it's worth talking to your accountant. We also offer a completely free, no-obligation conversation.
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