With the Spring Budget looming in March, it is easy to be tempted to delay tax planning until afterwards in hopes of favourable tax cuts.

However, the Chancellor has made it clear that significant cuts to taxation aren’t likely to be in his speech and so businesses should be taking steps now to prepare for the changes already being introduced in the months ahead.

Tax planning for businesses doesn’t have to be complicated. Small business owners can take advantage of certain deductions, credits and other tax benefits to help reduce the amount of tax they owe.

Corporation tax is a major tax for companies and tax planning allows businesses to reduce liabilities by taking advantage of capital allowances, R&D tax relief or other initiatives that encourage investment by offsetting expenditure against profits.

Effective tax planning can enable you to bring forward expenses or defer income, so as to delay tax payments into future years.

Your taxation planning should be part of a wider business plan helps you to:

• Outline your business’s goals
• Plan for investments and expenditure
• Identify and be prepared for potential problems
• Have the ability to measure your progress

A robust and well-prepared corporate tax plan can help you to make the most of the money and investments within your company.

With the end of the tax year fast approaching on 5 April, it makes sense to assess your tax situation and make use of the reliefs and allowances available to you.

Here are a few quick wins you can consider to help reduce your liabilities now and in the future:

Inheritance Tax (IHT)

Each tax year individuals are allowed to give away up to £3,000 worth of assets or cash without it being added to the value of their estate, referred to as your ‘annual exemption’.

If you have any unused annual exemption, this can be carried over to the next tax year.

Capital Gains Tax Allowances

Capital Gains Tax (CGT) is charged when you sell or dispose of an asset and make a profit. You are only taxed on the amount you gain from the sale or disposal.

UK residents can make a certain amount of gains each tax year before being charged CGT, this is known as the Capital Gains Tax Exemption.

The figure for 2022/23 is £12,300 but this will fall to £6,000 for 2023/24, before being reduced to £3,000 for 2024/25.

You should ensure that you are using your CGT Exemption before the end of the tax year and plan disposals to take advantage of the current higher rate.

Personal Allowance (PA)

Each individual is entitled to their own personal allowance (PA), which is set at £12,570 for 2022/23.

Part of the PA can be transferred between spouses and civil partners. The Marriage Allowance of £1,260 can be transferred, but only where neither spouse/civil partner pays tax at the higher rate.

Annual Pension Allowance

Ensuring you have made full use of your annual pension allowance is an important way to save tax. The current allowance allows most individuals to invest up to £40,000 a year before tax is applied. This allowance can be carried over several years if it has previously been unused.

Individual Savings Accounts (ISAs)

You pay no Income Tax on the interest or dividends you receive from an ISA and any profits from investments are free of Capital Gains Tax. You can pay your whole allowance of £20,000 (for 2022/23) into a Stocks and Shares ISA, a Cash ISA or any combination of these.

Taking advantage of these allowances will save you and your business money. It is good practice to repeat the process every tax year.

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will now come into effect in April 2026 for businesses, self-employed individuals, and landlords with gross business and/or property income over £50,000.

This will be followed in April 2027 for those with similar incomes over £30,000. The question is, how soon should your business start using cloud-based compatible software before that deadline?

The answer – the sooner the better.

Beyond compliance, the benefits of MTD cloud accounting software include:

• Reduce human error by keeping digital records and submitting tax information digitally
• Easily capture and digitise receipts using associated apps
• Making important decisions faster with a real-time overview of your financial position and performance
• Automate important financial functions, like cashflow forecasting
• Reduce your costs and saves you time by remaining constantly connected to your business through secure, remote servers
• Enjoy up-to-date software, with all the latest functions and legislative compliance
• Your work is saved automatically as you go, so you save both time and money on backup procedures
• Collaborate with your accountant anywhere in the world, at any time.

MTD-compliant cloud accounting software will generate the summary updates, which must be sent to HMRC every quarter via your HMRC digital account under Making Tax Digital.

You will be able to see how much tax you owe based on the information you have provided, so you can be better prepared for future tax bills.

Being prepared for MTD and having the correct software in place and ready to use will ensure a smooth transition to the new system, but, as you can see, the benefits go far beyond compliance.

Business plans provide goals to work towards, help identify potential problems, give insight into competitors, and highlight potential opportunities.

A great business plan should include a concept, strategy, executive summary, market analysis, competitor analysis, the company’s financials and a clear action plan.

Concept

This part of the business plan is usually broken down into three elements:

• Executive summary
• Company description
• Products/services.

The executive summary will highlight the mission of the business by describing its products and services.

It might also be a good idea to briefly explain why you are starting your business and include details about your experience in the industry that you are entering.

Strategy

Understand the scope of your business, as well as the amount of time, money, and resources you will need to get started by writing it down to help clarify your ideas.

Market analysis

You should identify your target customers’ needs, desires and pain points and understand how you can meet them. You also need to understand what else is available on the market and how your offering differs.

Competitor analysis

While it is important to understand the market you are operating in, it is also important to assess the success and weaknesses of competitors within your market to spot gaps and beat the competition.

Financials

A crucial area, this should outline projections for short-term growth and long-term profitability. You should include projections of your profit and loss statements, balance sheets, and cash flow statements for the next three years.

Setting these points out should help you create a clear set of definable actions that can help your business to grow and flourish. Having a detailed, well-prepared business plan will increase the chances of survival and success for any venture.

Small business owners need to take measures to avoid costly mistakes when it comes to calculating, reporting and paying Value Added Tax (VAT).

The best way to prevent errors and stay on the right side of HM Revenue & Customs (HMRC) is to have an expert take care of your VAT affairs.

Having a qualified accountant or bookkeeper can ensure that all calculations are correct, up-to-date, and submitted on time and in line with the latest VAT regulations, including Making Tax Digital.

Employing an accountant to keep on top of record keeping will go a long way in preventing expensive mistakes and financial penalties related to VAT.

Some of the most common VAT errors include:

• Entertainment: You can claim back VAT on entertaining employees, but not normally for clients.
• Split usage: Where you provide items such as cars or phones, you can only claim VAT back on business use.
• Inaccurate information: Entering the wrong figures on a VAT return may leave you liable to an investigation by HMRC or lead to you paying too much or too little tax.
• Filing late: Ensuring that you file the necessary VAT information, on time, each quarter is essential to preventing the accumulation of penalty points, which can lead to a fine.
• Failing to register: If you reach a taxable turnover of £85,000 or more in any tax year, you will need to register.

To cut down on the chance of errors there are a few things you can do to improve VAT reporting:

• Take time to update – Keep on top of VAT by setting aside a regular time each week – or each day – to update your accounting records.
• Maintain accurate records – It is important that you retain invoices and receipts so that you can accurately report VAT. This is easily achievable with the latest cloud accounting software and apps.

Speaking to a VAT expert will help you avoid many of these mistakes, which can be easy to overlook, but could be costly to you and your business.

Sign up for our cost-effective fee protection service and enjoy the peace of mind that we have you covered.

HM Revenue & Customs (HMRC) can choose to subject anyone to a tax investigation at any time.

Tax investigations can be long and costly processes and it is important that you have the right team to fight your corner.

Our trusted experts at Benson Wood can help you to manage any tax enquiries you might receive and by signing up for our fee protection service, you will be covered come what may.

This offers you protection from considerable fees in relation to:

• Full HMRC enquiries.
• Aspect enquiries.
• Business inspection notices.
• Compliance visits or disputes concerning PAYE/NIC/CIS disputes.
• VAT disputes.
• Employment status and IR35 disputes.
• Inheritance Tax (IHT) cover.
• Gift Aid inspections.
• Partners and directors cover.
• Applications for Judicial Reviews.
• Interventions and informal enquiries cover.

Having supported other clients with investigations, we understand the demands of enquiries and how HMRC works and can help you build strong arguments to counter any claims.

Enquiries can take many years to resolve and be costly without expert defence, so find out how our fee protection service can assist you.

Please get in touch if you have an existing policy with us that is due for renewal or are looking to use our fee protection service.

The Government has announced a two-year delay and further changes to the rollout of its Making Tax Digital for Income Tax initiative.

The delayed implementation of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) means it will now be phased in from April 2026 for a smaller number of taxpayers, rather than the original launch date of April 2024.

The move will give self-employed workers, sole traders and landlords more time to prepare for the upcoming changes.

What is changing? 

From the new start date, instead of MTD for ITSA applying to all self-employed workers and landlords with property and/or business income of more than £10,000, it will now only apply to those with income exceeding £50,000.

As per the original plan, they will have to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

Those with an income of between £30,000 and £50,000 will also need to comply with this from April 2027. However, all taxpayers will be able to join voluntarily beforehand if they wish to eliminate common errors and save time managing their tax affairs.

What about smaller businesses?

The Government has also announced a review into the needs of smaller businesses originally due to use the system in 2024, particularly those under the £30,000 income threshold.

The review will consider how MTD for ITSA can be shaped to meet their requirements and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.

MTD for ITSA will not be extended to general partnerships in 2025, as previously announced. However, the Government says it “remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy”.

Under the original plans, MTD would also be extended to Corporation Tax, but the Government is yet to confirm when this final phase will begin.

Businesses are being advised that time is running out to be able to take advantage of the Corporation Tax super-deduction capital allowance scheme. This allows businesses to claim back 130 per cent on investments made in plant or machinery.

The scheme runs until 31 March 2023 and with Corporation Tax rates set to rise in April 2023 for more profitable businesses, there’s not much time left to take advantage of this generous scheme.

The scheme was an incentive to invest in new assets to aid the recovery of companies after the pandemic.

The measure allows organisations to claim a super-deduction providing an allowance of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances.

They can also use the first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing-down allowances.

What is classified as plant and machinery?

There are many forms of ‘tangible’ assets used in the day-to-day running of a business. Some examples include:

• Ladders, drills, cranes
• Office furniture
• Refrigeration units
• Electric Vehicle charge points
• Compressors

Certain expenditure is excluded, for example, the acquisition of company cars. To benefit from the relief the assets purchased must also be new and not second-hand or refurbished equipment.

How does it work?

A company incurring £1 million of qualifying investments decides to claim the super-deduction.

Spending £1 million will mean the company can deduct £1.3 million (130 per cent of the initial investment) in working out its taxable profits.

Deducting £1.3 million from its taxable profits will save the company up to 19 per cent of that – or £247,000 on its Corporation Tax bill.

What about unincorporated businesses?

The relief is only available to limited companies, but unincorporated businesses can continue to benefit from the Annual Investment Allowance (AIA), which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

Every business needs sound financial planning and oversight in order to thrive. With the new tax year just around the corner, now is the perfect time to start thinking about ways you can improve your business’s finances in 2023. Read on to learn some of our top tips for making sure your business’s finances are healthy and secure.

Develop a financial plan for the year ahead

The best way to ensure that your business is financially secure is by developing a detailed financial plan for the coming year. This plan should include projected revenue and expenses, as well as goals for sales, profits, cash flow, investments, debt reduction, and other key areas of your business. Setting out these targets will help keep you motivated and on track towards achieving them by providing a roadmap of where you want to be at each point in the year.

Analyse your cash flow regularly

It’s essential that you monitor your cash flow closely throughout the year. Doing so will help you identify any potential issues before they become major problems. To make this easier, create a spreadsheet that tracks all incoming and outgoing funds from your business over time so you can see if there are any patterns or trends emerging. If there are any discrepancies between expected income/expenses and actual figures, investigate why this is happening so that it doesn’t become a recurring issue.

Review your finances before making big decisions

Before making any big decisions about investing or expanding your business, it’s important that you review your current financial situation carefully. This will give you an accurate picture of where your business stands financially so that you can make informed decisions about how best to proceed without putting yourself at risk of overextending yourself or taking on too much debt.  It’s also good practice to run through “what-if” scenarios when making big decisions like hiring new staff or buying expensive equipment – what would happen if something unexpected occurred? Having contingency plans in place will help protect against possible losses down the line.                                                                                            

Taking control of your small business’s finances requires careful planning and regular review – but it’s worth it! When done properly, developing a detailed financial plan for 2023 and beyond can help keep your business running smoothly while allowing room for growth and expansion without overextending yourself financially. As long as you remember to analyse your cash flow regularly and think carefully before making big decisions related to investments or expansion plans then you should be well on your way towards improving your business’s finances this year.