Managing a limited company as a contractor can be challenging, especially when it comes to reconciling your year end accounts at the end of the tax year.
While April is here, there is still time to make the most of your options and make sure you’re able to get the most out of your tax planning.
If you’re struggling to make the most of this year’s allowances, here’s our list of some essential tips to handle year end accounts efficiently through your Limited Company.
Claim tax relief
Remember that you can claim 20 per cent corporation relief on all valid business expenses when it comes to your final reconciliation.
This includes common costs like fuel allowances, accommodation, food, equipment and elements that are solely for business purposes. Doing so can save money where it matters most and optimise cash flow for the new tax year.
Check your eligibility for VAT flat rate scheme
If your business currently turns over less than £150k per annum, your company may be eligible for the flat rate scheme for VAT.
This involves giving up an ability to claim VAT on your purchases, but you can declare it on the gross value across all your sales – setting it at a significantly reduced percentage.
Understand your company’s tax position
After salary and your expenses are taken, you need to determine how much profit or loss your company has made at any point in time. You will need to take into account VAT and corporation tax. You will then find out your company’s profit after tax, which can be taken as a dividend.
What dividends to take
When it comes to taking dividends, it is important to understand how to do so in an efficient and effective manner.
Remember you are not required to take all your businesses’ profits as dividends and doing so may result in you being pushed into a higher tax bracket – producing increased personal tax liability.
Make the most of your allowances and tax free benefits
Taking the time to review your professional allowances can help you enjoy some small, but morale-boosting advantages.
Remember that under HMRC rules, you and your employees can be provided with a phone tax-free for personal and professional use.
And, you are also allowed to spend £150 per employee tax-free for a staff party and you will receive Corporation Tax relief on this expense.
While office parties normally occur at Christmas, remember that a Limited Company can take it at any time of the year, letting you celebrate major milestones.
Seek tax advice
While it’s possible to complete your own returns, it is always best to spend a little extra to seek help from an accountant or tax advisor.
Selecting the right accountant can ensure your returns are correct, draw down the biggest benefit for your company, and take advantage of the newest financial products on the market.
If you’re struggling to manage your end-of-year accounts or understand any accountancy issues, then the team at One Click Accountant is here to assist.
With many years’ professional experience, our experts have provided care and support to small and medium-sized businesses across a range of sectors.
Or, if you have any specific questions related to year end accounts, please do not hesitate to get in touch and let us know how we can help.