Year-End Tax Planning Guide for UK Limited Companies

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Year-End Tax Planning Guide for UK Limited Companies

Hawkins & Co Accountants & Bookkeepers Ltd

As the financial year draws to a close, it’s crucial for limited company directors to review their tax position and implement strategies to minimise their liabilities while staying compliant with HMRC regulations. Here’s a comprehensive year-end tax planning checklist for UK-based limited companies.

1. Maximise Allowable Expenses

Review all business expenses to ensure you’ve claimed everything you’re entitled to, including:

  • Office rent, utilities, and business rates
  • Travel and subsistence expenses
  • Marketing and advertising costs
  • Professional fees (e.g., accounting and legal services)
  • Business insurance and training courses

Ensure all expenses are “wholly and exclusively” for business purposes.

2. Make the Most of Capital Allowances

  • Annual Investment Allowance (AIA): You can deduct up to £1 million of qualifying expenditure on plant and machinery.
  • Super-Deduction (if applicable): If still available for your company, you may claim 130% relief on certain new plant and machinery investments.
  • Consider purchasing equipment or technology before year-end to accelerate tax relief.

3. Optimise Director’s Remuneration

To remain tax-efficient:

  • Pay a salary up to the National Insurance (NI) threshold (£12,570 for 2024/25) to preserve State Pension benefits.
  • Take dividends up to the £500 dividend allowance and within the basic rate tax band (£50,270 total income).
  • Consider bonuses if profits allow but assess tax implications first.

4. Dividends and Profit Extraction

  • If you have accumulated profits, consider declaring dividends before year-end to utilise lower tax bands.
  • Ensure dividends are covered by retained earnings and properly documented.
  • Be mindful of the increased dividend tax rates from April 2022.

5. Pension Contributions

  • Employer pension contributions are tax-deductible and do not attract National Insurance.
  • You can contribute up to £60,000 per year (Annual Allowance) or carry forward unused allowances from the past three years.
  • Contributions reduce corporation tax liability while benefiting your retirement planning.

6. Review VAT Position

  • If turnover is approaching £90,000, consider VAT registration.
  • If on the Flat Rate Scheme, ensure it’s still beneficial.
  • Consider VAT cash accounting to improve cash flow.
  • Ensure VAT returns are up to date to avoid penalties.

7. R&D Tax Relief (If Applicable)

  • If your company undertakes innovative projects, R&D tax relief can provide up to 86% deduction (or 20% payable credit for loss-making SMEs).
  • Review whether any development work qualifies for relief.

8. Check Use of Company Cars & Benefits in Kind

  • If you provide company cars, consider tax-efficient electric vehicles for lower Benefit-in-Kind (BIK) tax rates.
  • Review other taxable benefits such as medical insurance or loans to ensure they remain cost-effective.

9. Corporation Tax Planning

  • Ensure all allowable deductions and reliefs are claimed.
  • Consider delaying or accelerating income and expenditure depending on your projected tax band for the next year.
  • Be aware of the corporation tax increase to 25% for profits over £250,000 (with marginal relief for profits between £50,000 and £250,000).

10. Use of Losses

  • If your company made a loss, consider carrying it back against previous profits to claim a corporation tax refund.
  • Alternatively, carry forward losses to offset future profits.

11. Employee & Director Bonuses

  • Bonuses must be contractual and paid within 9 months of year-end to be deductible.
  • Consider alternative tax-efficient rewards like tax-free trivial benefits (up to £50 per employee per benefit).

12. Ensure Compliance & Avoid Penalties

  • File accounts and tax returns on time to avoid fines.
  • Review Companies House filings and update director/shareholder details if needed.
  • Stay compliant with Making Tax Digital (MTD) requirements.

How Hawkins & Co Can Help

At Hawkins & Co Accountants & Bookkeepers Ltd, we work closely with limited companies to ensure they take full advantage of available tax reliefs and remain compliant with HMRC regulations. Contact us today for tailored year-end tax planning advice.

📞 01279 812277
📧 Abby@hawkinsaccountants.co.uk
🌐 www.hawkinsaccountants.co.uk