Company year-end preparations: time to get ready

company year end

As your company year-end date gets closer, there are a number of administrative and financial tasks to start planning for – so it’s a good idea to get yourself organised and ready.

There are several things to check, either on the year-end date, or before the end of your company’s financial year. Some tasks are simple administrative processes, while others involve a deeper dive into your accounts. But, on the whole, this is about getting on top of the planning and making sure your year-end is as hassle-free as possible.

The benefits of good year-end planning include:

  • A smoother year-end – keeping on top of the company’s bookkeeping and administration means that the processing of your year-end will go more smoothly.
  • Better tax planning – reviewing your business performance before the year-end allows you to manage your tax obligations in a more effective way, improving your tax-efficiency and (potentially) saving money.
  • Improved personal wealth planning – as an owner/director, you can structure your own remuneration package in a way that you prefer. This improves your personal tax situation and wealth planning for the year-end, driving tax efficiency.
  • Enhance your reported profits – by changing the timing of some discretionary transactions, you can directly influence the results that will be reported for the company. This can be an advantage when looking for funding or investment.

A checklist for your company year-end tasks

We’ve highlighted the main year-end tasks to add to your to-do list, broken down into admin, tax-driven and cosmetic tasks – all aimed at a stress-free year end process.

Primarily admin issues:

  • Make sure that you are able to put a correct value to the stock you hold in the business and on your current work in progress (WIP).
  • Ensure all your sales invoicing is up to date and all jobs for the year have been billed out to customers.
  • Resolve any customer (and supplier) queries, where possible. And, if it’s practical to do so, write off or provide for any bad or doubtful debts.
  • Make sure all the company’s bookkeeping is up to date and that all balance sheet accounts have been reconciled.
  • Prepare draft figures at least one month before the end of the year so that any last interim dividend declarations can be made.
  • Keep final statements from all your major suppliers.
  • Keep an extra copy of the last invoices for utilities and services, for cost accruals.

Primarily tax-driven:

  • Generally, to qualify for tax relief, payment for fixed assets acquired during the financial year must be due no longer than four months after year-end, otherwise the actual payment date(s) is substituted for the date of acquisition. Where the asset is bought on hire purchase, the date on which it is actually brought into use is the relevant date for claiming tax relief. If you have plans to purchase new assets, it may be worth buying equipment a few months earlier than planned – this allows you to then claim the tax deduction. However, don’t buy things you don’t need just to save tax! Remember that the super-deduction falls away at the end of March 2023.
  • Charitable donations must have been paid in full to the charities in question; you can’t just provide for them in the accounts. If you donate a percentage of the company’s profits or sales to charity, then estimate the final amount as close as you can so that the obligation is largely spent.
  • Tax relief on pension contributions is given in respect of the period in which it’s paid, so don’t leave it until after year-end before paying contributions over.
  • Review the remuneration policy for your shareholder directors to ensure the right balance between salary, dividends and pension contributions.
  • Review directors’ loan accounts, particularly where they’re overdrawn and therefore potentially subject to Section 455 charges.

Cosmetic/other:

  • You may want to make the company’s performance look as good as possible – i.e. moving results from a future period in order to make the current period look better. This can be helpful if you’re looking to access finance in the next year, or want to woo potential investors etc.
  • You may want to think about deferring expenditure to improve your overall reported profits. This could mean reducing spending on things like stationery, advertising, research and development, capital expenditure and major repairs and renewals. Although that will result in a higher tax bill, it will also allow a higher reported profit to be disclosed.

Talk to us about preparing for your year-end

The better prepared you are, the easier your year-end will be. So, there’s real value in running through the checklist above and getting your finances ready for the close of the current year.

We can help you get your numbers in order and advise you on any elements where you might need some help, or have queries.

Unlocking the Benefits of Business Asset Disposal Relief

business asset disposal releif

How Business Assets Disposal releif works.

When it comes to running a successful business, managing your assets effectively is key. This includes acquiring, maintaining, and sometimes, disposing of assets. The process of getting rid of assets you no longer need might seem straightforward, but it can have a significant impact on your business’s finances and tax liabilities. This is where Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, comes into play.

In this blog, we will explore what Business Asset Disposal Relief is, how it works, and the benefits it can offer to business owners.

Understanding Business Asset Disposal Relief

Business Asset Disposal Relief (BADR) is a tax relief scheme provided by the UK government. It aims to encourage entrepreneurship and business growth by reducing the amount of capital gains tax (CGT) individuals need to pay when disposing of certain business assets. While the name has changed from Entrepreneurs’ Relief, the principles behind the relief remain the same.

Here are the key points to understand about BADR:

  1. Eligibility: To qualify for BADR, you need to be a sole trader, business partner, or shareholder of a trading company. The relief applies when you dispose of assets used for the business, such as shares or business assets.
  2. Capital Gains Tax Reduction: BADR provides a lower rate of capital gains tax (currently 10%) on the profits made from the sale of qualifying business assets. The relief is subject to a lifetime limit, beyond which the standard CGT rate applies.
  3. Lifetime Allowance: As of my last knowledge update in September 2021, the lifetime allowance for BADR was £1 million. This means that if your lifetime gains under BADR exceed this limit, you’ll pay the standard CGT rate on the excess.

Benefits of Business Asset Disposal Relief

Now that we’ve covered the basics, let’s delve into the benefits of Business Asset Disposal Relief for business owners:

  1. Tax Savings: One of the primary advantages of BADR is the significant reduction in capital gains tax. Paying only 10% on qualifying gains can result in substantial tax savings, making it an attractive option for entrepreneurs looking to sell or transfer business assets.
  2. Incentive for Investment: BADR encourages business owners to invest in their enterprises. The relief rewards those who have taken risks by investing in and growing their companies, thereby promoting business development and job creation.
  3. Retirement Planning: BADR can be especially beneficial for business owners planning their retirement. It allows them to access the value tied up in their business assets with a reduced tax burden, facilitating a smoother transition into retirement.
  4. Succession Planning: Business Asset Disposal Relief can also aid in the smooth transition of a business to the next generation. Whether you’re passing on the business to a family member or selling it to a third party, the lower CGT rate eases the financial burden.
  5. Investment in Innovation: By reducing the tax burden on asset sales, BADR can free up capital for reinvestment in the business. This can be a catalyst for innovation, expansion, and increased competitiveness.
  6. Attracting Investors: If you’re seeking external investment or a buyout of your business, BADR can make your company more attractive to potential investors, as they may benefit from the reduced tax rate when selling their shares.

Business Asset Disposal Relief is a valuable tool for business owners in the UK. By reducing the capital gains tax liability on the sale of qualifying business assets, it incentivises entrepreneurship, investment, and growth. Understanding the eligibility criteria and limits of BADR is essential for making the most of this tax relief.

However, tax laws are subject to change, and the details of BADR may have evolved since my last knowledge update in September 2021. Therefore, it’s crucial to consult with a qualified tax advisor or accountant to ensure you stay compliant and maximise the benefits of Business Asset Disposal Relief for your specific circumstances.

HMRC Tax Rule Changes: Impact on Side Hustles in the UK

HMRC

In an ever-evolving economic landscape, the rise of side hustles and freelancing has become a common way for individuals to supplement their income and pursue their passions. However, with this growing trend comes the need for tax regulations that adapt to the changing workforce.

HMRC (Her Majesty’s Revenue and Customs) is set to implement a significant change to tax rules in the UK, specifically targeting those engaged in side hustles. These changes, slated to take effect next year, could have a profound impact on how side hustlers manage their finances and tax obligations.

In this blog post, we’ll explore the key details of these upcoming HMRC tax rule changes, how they will affect individuals with side hustles, and what steps you can take to ensure compliance and financial security. Whether you’re a seasoned freelancer or someone looking to dip their toes into the world of side gigs, understanding these changes is crucial for financial success and peace of mind.

The New Reporting Mandate: What Side Hustlers Need to Know

Starting on January 1 2024, HMRC has implemented a game-changing mandate that affects popular side hustle platforms such as Airbnb, Fiverr, Uber, Deliveroo, and Etsy. These platforms have been instructed to record the income generated by individuals using their services and report it to the HMRC. This means that the tax authorities will have access to detailed information about how much money people are making through their side hustles on these platforms.

For individuals engaged in these side hustles, this represents a significant shift in how their earnings are monitored and reported for tax purposes. Here are some key aspects to be aware of:

1. Improved Tax Transparency: The new reporting mandate is aimed at enhancing tax transparency and compliance. It enables the HMRC to cross-reference income reported by side hustlers with their tax declarations, ensuring that individuals are paying the correct amount of tax on their earnings.

2. Reduced Tax Evasion: By having access to accurate income data from these platforms, HMRC can more effectively identify instances of tax evasion. Side hustlers who underreport their earnings or fail to declare income may face penalties and legal consequences.

3. Impact on Tax Obligations: Side hustlers need to be diligent in reporting their income from these platforms. Failure to do so accurately may result in discrepancies that can lead to tax investigations and potential fines. It’s essential to keep meticulous records of your earnings and related expenses.

4. Third-Party Reporting: The reporting process will be handled by the side hustle platforms themselves. They will provide HMRC with detailed information on how much money their users have earned through their services. It’s important to understand that this reporting is not optional; it’s a legal requirement for these platforms.

In summary, these changes represent a significant step towards ensuring that side hustlers are meeting their tax obligations. The increased transparency provided by third-party reporting may lead to greater accuracy in tax filings, but it also means that individuals need to be vigilant in reporting their earnings correctly.

These upcoming changes in HMRC tax rules are set to reshape how side hustles are managed in the UK. With popular platforms like Airbnb, Fiverr, Uber, Deliveroo, and Etsy now required to report earnings, it’s more important than ever for side hustlers to stay informed and compliant.

If you have any questions, concerns, or simply want to understand how these changes might affect your side hustle, don’t hesitate to get in touch with us. We’re here to help and provide you with the information and guidance you need.

As we move into the new year, these changes will undoubtedly generate questions and challenges for side hustlers. Whether you’re a seasoned freelancer or just starting your journey into the world of side gigs, staying informed and prepared is key to financial success and peace of mind.

Please feel free to reach out to us for more information, assistance, or to share your thoughts on these tax rule changes. We’re here to support you on your side hustle journey.

What working from home expenses are deductible for your business?

working from home

With greater use of working from home now the norm for many UK businesses, it’s important to think about the deductible expenses that you may be able to claim when working from a home office.

Working from home results in us using more power, more broadband and more heating than when working from an office space, or from a coworking space outside the home. But which elements of your home expenses can you claim back? And how does the process work?

Which of the four home-working categories applies for you?

To be able to claim back your home-working expenses, your home office must be your main place of business. If you generally work away from home and just use the dining-room table to complete the occasional bit of paperwork, that won’t count.

There are four groupings into which your business must fall when it comes to claiming back home-office expenses: Limited Company or Unincorporated, with each claiming at either a flat rate or a higher amount.

  1. Limited Company & Flat Rate: a flat rate of £6 per week can be claimed against your home expenses.
  2. Unincorporated & Flat Rate: this is intended for unincorporated businesses (sole traders etc.) who work from home, and is broken down into three scaled categories
    • If you work at home 25-50 hours/month, you can claim £10/month,
    • If you work 51-100 hours/month, you can claim £18/month,
    • If you work 101+ hours/month, you can claim £26/month.
  3. Limited Company & Higher Amount: If you want to claim more than the scale rate, it’s preferable to have a rental agreement between you and your company to avoid the charges being treated as salary. The rent should be market-related – which can be difficult to establish. Because of this, the rental price is often worked out as the share of mortgage interest or rent, council tax, utilities and buildings insurance. If there are six rooms in the house (ignore halls, kitchens and bathrooms) and one is used for the business, then you claim 1/6th of those costs. It would be unusual for more than one room to be used for business, but could be the case if, for example, you’re a photographer with a studio and a separate office in the house.
    • Note re repairs: repairs for your ‘home office’ room can be claimed back in full, and repairs for other rooms can’t be reclaimed at all. General repairs to the house (e.g. re-tiling the roof) can be claimed proportionally, so 1/6th in the example we’ve given.
  4. Unincorporated & Higher Amount: An unincorporated business can’t charge rent as such, so no formal agreement is needed. But you can claim back an amount against tax, calculated in exactly the same way as for a limited company.

Important points to be aware of

The claimable expenses may sound reasonably simple to calculate, but there are some other important factors to take into consideration.

  • Capital gains tax on a property sale: The sale of a residential property isn’t normally subject to capital gains tax (CGT). But if you use one room exclusively for business, then the proceeds of the sale of that room are potentially liable for CGT. Simplistically, for example, if you have a home office that takes up 10% of the total area of the house, and the house is sold producing a capital gain of £100,000, 10% of that gain would be subject to CGT. However, if a spare bedroom with a desk is temporarily used as a workspace while the employer’s office is not accessible, this would not give rise to any capital gains tax issues.
  • Use of the room: If possible, try not to use any room exclusively for business. Put an exercise bike in your office room for workouts, so it’s only available for the business 90% of the time! The ‘1/6th’ in the earlier section then gets reduced by 10% and the rental agreement specifies that the room isn’t available for business use between specified hours, or on specified days.
  • Phone and broadband expenses: Your home telephone expenses only cover the cost of itemised business calls, not the whole bill. Your internet provider costs are not allowable as dual usage (personal and business) unless you have a separate connection for your business. Your mobile phone bill is fully allowable (so personal use is ignored) but if you’re claiming as a limited company then the mobile contract MUST be in your company name.

Talk to us about claiming your home expenses

With more and more of us now working from home, it’s important to know what expenses you can claim for, and how much you can claim back against these home-working overheads.

Talk to us and we’ll help you calculate what can (and can’t) be claimed, and what the impact will be on your annual tax bill.

Get in touch to talk through your home expenses.

Back to Tax Basics: Director taxes

Director taxes

What taxes will I need to pay as a director?

When you set up a new company, there are certain business taxes you’ll be liable for as a business. But have you also planned for the personal taxes you must pay as a director?

As a company director, it’s not just the company’s corporation tax that you have to pay. You also need to pay the requisite taxes on your own income. This might be dividends payments from the company’s year-end profits, or even the income you receive from any property, shares or investments you own.

Knowing which personal taxes to plan for

A fundamental distinction to understand is the difference between company assets/profits and your own personal money.

Money that’s been generated by your company will sit in your business bank account and can be seen as the cash assets of your business. But, as a director, this is not your money. It’s the company’s money. This cash only becomes yours once it’s been paid to you, either as a dividend, a loan or via a salary paid through the company’s payroll.

HM Revenue & Customs (HMRC) will charge the company corporation tax on the company’s earnings. But HMRC will also need to charge you income tax on the cash you’ve been paid as a director – and this means planning for these tax costs as part of your wealth management strategy.

As a director, you’ll need to plan for:

  • Self-assessment income tax – self-assessment is the way that directors and self-employed people pay their income tax and National Insurance contributions (NICs). In addition to any tax and NIC collected monthly via PAYE as part of your normal payroll, with self-assessment, you must complete an annual personal tax return and submit this to HMRC. You then have to pay two ‘on account’ payments of tax and NICs.
  • Paying your self-assessment tax – paying your self-assessment tax bill is generally done by making two payments on account – one by the 31 January in the relevant tax year and one by the 31 July following the end of the tax year. If needed, a final ‘top up’ payment may be required at the end of January, following the end of the tax year. Through this system, not only does the company pay tax on its profits, but you also pay income tax when you take any of the remaining after-tax profits out of the business as dividends.
  • PAYE income tax – if you pay yourself a salary through the company’s payroll, this income will be taxed at source via the pay-as-you-earn (PAYE) system. The PAYE system will deduct your income tax and National Insurance (NI) contributions via your in-house payroll and this will then be paid directly to HMRC. This income will need to be accounted for in your self-assessment tax return, but you’ve already paid the income tax that is due on this salaried income.
  • Capital gains tax – capital gains tax (CGT) is a tax you pay on ‘gains’ you’ve made during the tax year. CGT is paid on the profit you make when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. So, for example, if you sold your business at a profit, you’d be liable for any gain (increase in value) that you’d made on selling the company. The rate of CGT that you pay will depend on your own income tax band and the nature of the gain that you’ve made. Reliefs are available, including the Business Asset Disposal Relief.

Learn more about the basics of directors’ personal tax

If you’d like to have a chat about your self-assessment or capital gains liabilities, please do contact us. The earlier you plan for these taxes, the more you can mitigate their impact.

Get in touch if you have any questions about tax.

What is Making Tax Digital for Income Tax Self Assessment?

making tax digital

Making Tax Digital is changing how we submit tax returns. And with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) coming into force from April 2026, it’s time to start planning how you’ll meet the compliance requirements for MTD for ITSA.

We’ve highlighted the four main areas where you need to take action, to be ready for the deadline – so you maximise all the benefits of going digital.

The basic requirements of MTD for ITSA

MTD for ITSA will affect you if you’re running a self-employed business or you’re a landlord with annual business or property income initially above £50,000. To comply with the MTD for ITSA rules when they kick in from the 2026/27 tax year, you’ll need to:

  • Keep digital records of all business transactions
  • Submit quarterly updates to HMRC
  • Submit an annual end-of-period statement
  • Finalise your tax return for the year
  • Pay any tax due to HMRC

This switch from an annual self-assessment tax return process to quarterly and annual returns is a major change. It means increasing your interactions with HMRC, keeping extremely accurate digital records and having a highly defined process for your tax return.

Some people will already be set up to meet these digital requirements. But, if you’ve not yet jumped onto the digital bandwagon, there are a few important steps to think about.

Switching to a digital tax process – what you need to do

The aim of MTD is that, over time, the whole of the UK tax system will move to digital. But for this to work, taxpayers, bookkeepers and accountants all need to take action, so every stage in the tax process can be carried out in the digital realm.

From the point of view of a self-employed business or landlord, this will mean:

  • Choosing a software solution for your digital record-keeping – to be able to keep digital records, you’ll need the right software tools. An Excel spreadsheet may be fine for traditional bookkeeping, but the MTD ITSA requirements mean you’ll need a more accurate and flexible software solution. Tools like Dext Prepare or Auto Entry, paired with a cloud accounting platform like Xero, Sage, QuickBooks or FreeAgent, will help you get those bank statements, receipts and documents digitised and recorded.
  • Working out a process for recording your income and expenditure – one of the big aims of going digital is to achieve real-time data for your business. But to be able to see real-time numbers, it’s vital that you enter your transactions on a regular basis. Think about how you’ll scan receipts and invoices, and how much time you need to set aside for bookkeeping and record-keeping. Yes, it will eat into your admin time, but the end benefits of this streamlined digital process make it a worthwhile investment.
  • Agreeing who will carry out your quarterly and annual updates – ultimately, it’s your responsibility to meet HMRC’s rules around MTD for ITSA. But you don’t have to do all the work yourself. Your tax adviser can help you collate and submit both the quarterly and annual digital updates. You can opt to do the updates yourself, but you’ll get a higher level of accuracy, review and analysis by partnering with your tax agent.
  • Partnering with your accountant to submit your return – despite what HMRC might tell you, tax can be complicated. Calculating your taxable profits, accounting for secondary income streams and making adjustments to your submitted numbers are tasks an accountant should be carrying out. MTD for ITSA will mean working much more closely (and more frequently) with your accountant, so make the most of their professional knowledge and expertise when it comes to finalising your tax return.

Talk to us about preparing for MTD for ITSA

Switching over to MTD for ITSA isn’t just a compliance requirement. Going digital also helps you run a more effective and flexible accounting and record-keeping system into the bargain.

You’ll have:

  • Better visibility of your income and expenditure
  • Improved control over your business numbers
  • A clearer idea of your tax liabilities for the year.

If you’d like advice on getting ready for the April 2026 MTD for ITSA deadline, feel free to contact us. We’ll help you understand what’s required, what the best software solutions will be for your business and the key changes you’ll need to action.

Get in touch to get set up for MTD for ITSA.