For Directors of Limited Companies
Clients should consider reviewing their Company’s financial position 5 to 6 weeks before the end of the financial year. Once your year-end date passes, most tax-planning opportunities for this trading period are legally locked out.
5 Key Action Items to Review Before Year-End
1. Employer Pension Contributions
To qualify for Corporation Tax relief in the financial year, pension contributions must be cleared in bank accounts before your year-end date. Promises or accrued contributions paid up after the year-end will defer tax relief to the following year.
2. Capital Expenditure & Asset Purchases
If you plan to buy plant, machinery, commercial vehicles, or IT equipment in the near future, bringing these purchases forward before year-end allows you to claim immediate tax relief via the Annual Investment Allowance (AIA) against this year’s profits.
3. Director Remuneration & Profit Extraction
Review your total income for the current tax year (salaries, dividends, and personal income). You can optimize your dividend declarations and salary mix prior to year-end to ensure optimal personal tax efficiency across the thresholds.
4. Bad Debts & Stock Valuations
Bad Debts
Review your sales ledger. Specific debts formally identified and written off as unrecoverable before year-end can be claimed as a tax-deductible expense.
Stock & WIP
Identify obsolete or slow-moving stock and write down its value to net realisable value before year-end.
5. Unpaid Director Loans
If your Director Loan Account is overdrawn, ensure a strategy is in place before year-end to avoid triggering additional Section 455 tax charges (33.75%).
Consider Reviewing Your Draft Figures
To ensure no tax-saving opportunities are missed, we recommend running a draft pre-year-end trial balance now. Do contact us should you require assistance with the review of your draft numbers or any of the options summarised above. Visit our social media for regular updates: Twitter | LinkedIn.
