As we navigate through the dynamic financial landscape of 2023/24, it’s crucial to stay informed and adapt to the changing tax and corporate regulations. At Kudos Accountants, we’re committed to providing you with the latest updates and effective strategies to maximise your financial efficiency. In this post, we’ll explore the best practices for optimising earnings, whether through salary or dividends, and delve into essential year-end tax planning strategies. Let’s take a closer look at the recent developments and how they impact your financial decisions.
Optimising Your Earnings in 2023/24: Salary vs. Dividends
As leading accountants, Kudos Accountants understand the complexities of tax-efficient earnings. Traditionally, a blend of a minimal salary and dividends has been the recommended approach for director/shareholders of family companies. However, with the new corporation tax rates effective from April 1, 2023, we’re advising a strategic reassessment.
The pivot in corporate tax structure – especially the 26.5% rate on profits over £50,000 – suggests that revising your remuneration method could be beneficial. Increasing your salary or introducing a company bonus might now offer greater tax efficiency.
Further tax-efficient strategies include company-funded pension contributions or opting for an electric company car. Each option has unique benefits, depending on your personal and company financial circumstances.
We recommend a proactive approach: let’s arrange a meeting a few months before your company’s year-end. This will allow us to tailor advice perfectly suited to your needs.
Year-End Tax Planning Strategies for Your Business
As year-end approaches, engage with Kudos Accountants for personalised tax planning advice. Here are some strategies you might consider:
- Accelerate Equipment Expenditure: Utilise the 100% Annual Investment Allowance and claim full expensing relief on new equipment.
- Hire Purchase Considerations: Ensure equipment is operational by year-end to maximise tax relief.
- Pension Contributions: Capitalise on the £60,000 annual input allowance.
The Changing Landscape for LLP Members
Since 2014, LLP members aren’t automatically classified as self-employed for tax purposes. A salaried member typically has a fixed salary or performance-based bonus, limited involvement in business decisions, and a capital contribution less than 25% of their expected LLP income.
At Kudos Accountants, we provide comprehensive reviews for LLPs, ensuring all members are correctly taxed and helping you navigate the complexities of PAYE and National Insurance contributions.
HMRC and Property Business Tax Schemes
Beware of marketed tax avoidance schemes, such as those spotlighted in HMRC’s recent publication. These schemes often promise tax benefits on property rental profits, but fail to deliver. Kudos Accountants can guide you through safe and effective tax planning strategies, avoiding pitfalls and ensuring compliance.
Charging Electric Cars at Home: Tax Implications
HMRC now recognises that reimbursing employees for home electric car charging costs is exempt from income tax. However, proving that the electricity was solely used for charging the company vehicle is crucial. Employers need to ensure that reimbursements are appropriately managed to avoid tax liabilities.
Reclaiming Input VAT on Share Sales
A recent tribunal decision opened the possibility for businesses to reclaim input VAT on professional fees related to share sales under specific conditions. Although HMRC might appeal, proactive claims could be beneficial for companies in similar situations.
Conclusion: Staying Ahead with Kudos Accountants
As the financial environment continues to evolve, staying informed and adapting your strategies is key to financial success. Whether you’re a director/shareholder, a member of an LLP, or exploring tax-efficient ways to manage your business finances, Kudos Accountants is here to guide you through these complexities. With our expert advice and tailored solutions, you can confidently navigate the changes and opportunities that 2023/24 brings. Contact us to schedule a consultation and let’s plan for a prosperous financial future together.
