The new tax year is set to bring a number of changes that will have an impact on UK businesses, so it is important to begin preparing for these changes.
However, with just a few days left in March, there are also a few things that Limited Company Directors can do now to save tax.
Here are 3 key things to consider ahead of the new tax year:
1. Make a Pension Contribution
Pension contributions qualify for Corporation Tax relief, but they don’t count as directors’ income for tax or NI purposes. This makes them very tax efficient.
As a Limited Company Director, there is a limit to how much you can pay into your pension pot in a single tax year. This limit is currently set at £40,000 including contributions you personally pay, however this amount is rising to £60,000 on 6 April 2023.
If your company wants to save tax by reducing its Corporation tax bill, it needs to make sure that there are sufficient funds to pay the employer pension contribution on behalf of the Limited Company Directors before the accounting period ends.
2. Super Deduction
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery assets are able to claim an 130% ‘super deduction’ capital allowance.
This tax relief is labelled ‘super’ because the relief obtained is more than the expenditure originally incurred, which was designed to stimulate business investment in plant and machinery.
However this initiative is coming to an end on 31 March 2023, so it is important to ensure you maximise this relief by accelerating any plans to spend on assets within your business.
3. Tax-free Dividend Allowance
The Dividend Allowance is the amount of dividend income you’re allowed to receive tax-free each year.
The government has announced recently that it will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
If you are a shareholder in a UK Limited Company, don’t forget to max out your £2000 tax-free Dividend Allowance before 6 April 2023.
|If you have any questions or need advice on any of the above, then please do not hesitate to contact us.