Let's be real: getting your ducks in a row for the end of the tax year can feel like a daunting prospect, even for the most seasoned professionals. Between key deadlines, income tax thresholds, pension contributions, and everything in between, preparing for the tax year can feel like working in a different language.
If you find yourself worrying about how to successfully close off another tax year - and what might happen if you don't get it right - you're not alone.
Any new tax year might come with some changes. This may not always be the case, and changes might not always be relevant to you directly, but it's important that you remain up to date with any adjustments outlined by HMRC.
It's also important to note that some of these changes are only applicable to certain types of business models and operations. For example, limited company contractors will need to be aware that dividend tax rates rose by 1.25% from April 2022. This will need to be taken into consideration in all financial planning before the end of the tax year to allow for sufficient planning.
You might also be aware that National Insurance rates increased by 1.25% - that will apply to all UK residents over the threshold but is particularly important to bear in mind for business owners.
For some businesses, a tax break is a legal and viable way of protecting your capital and keeping as much of it as possible in the company.
There are a few options available to you if you think a tax break could be right for you, but you will always need HMRC's explicit approval - and you'll need to ensure you're eligible.
Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes are often strong options for mid-sized businesses, and can mean a tax break of up to 50% on the amount invested. But - and it's an important caveat - the criteria to make you eligible for such a scheme is strict and can immediately eliminate a vast number of UK businesses.
Another option would be by using your company's allocated charity, should it have one. If you are a higher rate taxpayer and choose to donate a proportion to an organisation, either singularly or on an ongoing basis, then you might well be able to claim back some of the amount through tax relief.
Another caveat? It's complicated. Really complicated. So if you want to do this with your company, you may wish to seek professional advice.
If you're self-employed, the tax year isn't quite as clean cut. The key deadlines you'll need to adhere to are 31 January and 31 July (more on that another time).
However, just because you're self-employed, doesn't mean all of your work connections will be. Regardless of whether it's a vendor or a client, you may want to take the tax year into consideration when it comes to how you work with them.
Let's look at a good example. If you're in the digital marketing scene and have a client whose objective is lead generation for sales, the months approaching year end might result in additional pressure to secure sales. Meaning additional pressure for sales qualified leads (SQLs). Meaning additional pressure on you, the digital marketer, to gain those leads in the first place.
If this sounds somewhat familiar, you might want to make some [flexible] adjustments to your operations. For a starter, allow more lead up time with your client who might be preoccupied in the months of February, March and April. This will help ensure you and your client are still meeting the deadlines to get you there.
And you might want to consider where you can add most value for your clients in that Q1 period. If it's by taking on a little extra of the day to day to free up some time, then great. Or increasing spend on paid ads. Whatever that might be, it's worth thinking how you can best accommodate the tax year - even if you aren't directly impacted by that April date.
If you're a limited company or mid-sized business, the worst thing you could do in the tax year is to miss the deadline. Ultimately, this will lead to penalties and could further complicate the process. It also won't do you any favours in the long-run as it may increase your risk of being audited.
As with most aspects of your business's financial health, getting organised from the outset will significantly boost your ability to complete the tax year successfully - and get on the front foot for the year ahead.
Want to read more about tax in the UK? If you run a small business - or even if you’re self-employed - you might want to consider how the new Plastic Tax affects you. Read more here.