As we are fast approaching the end of the financial year and having just sorted out some of my own accounts, I thought it would be a great time to share some quick insights from Hughes Davies Accountancy on Tax Planning.
Tax planning is a process where you make use of all available exemptions, deductions, reliefs, and rebates in your financial planning. It is about implementing various strategies to reduce your tax liability but doing so in a legal manner that is right and appropriate for your business.
Simple ways ALL business owners can legally minimise their tax bill…
Tax Planning? It’s the one subject that I hesitate to write about. Why? Tax changes so quickly and because it is impossible to give advice without knowing individual circumstances.
Nevertheless, there are some general and straightforward things it is useful to be aware of. These will allow you to have more productive and meaningful discussions with your accountant to help you save money on your next tax bill.
Tax can be complicated
Firstly, tax is a complicated area of accountancy, so DON’T TRY AND DO IT YOURSELF, take advice. By that I mean proper advice, not the sort that comes from a “friend” or the man propping up the bar in the pub.
Your friend may well pay less tax than you, but people are notoriously inexact about their earnings, keen to boast and don’t usually understand their tax bill. Their circumstances may be very different to yours.
Tax planning is something that should be done during the year, not after, and certainly not just before the payment date for your tax.
Know what you are legally allowed to claim as expenses. Look at what your expenses are and what bracket they fit in to. Again it is advisable to discuss this with an accountant.
Good bookkeeping will give you the facts so you can have a reasonable discussion about your tax without having to wait until draft accounts have been prepared – it may be too late by then.
Well organised records will help you keep track of and claim all business expenses – you’re much less likely to have unexplained expenditure which you can’t claim for because you can’t remember what it was for.
While all expenditure should be supported by a receipt, I wouldn’t go as far as to exclude expenses simply because the receipt has been misplaced. Note down what the expense was for, when you spent it and hopefully you will be able to show it was a reasonable business expense. This should of course be the exception – if your records are littered with un-receipted expenditure, you’ll obviously have a problem.
Timing of purchases and investments and having relevant and appropriate expenses is something to be aware of – check with your accountant to be sure. Don’t just go buying something random to lessen your liability. Is the purchase / investment justifiable?
Tax planning does not mean failing to put all your takings through the books because “that is what everyone does”. This is not tax planning, it’s fraud.
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