Every March, it’s a good idea to check you’ve made the most of opportunities to be tax efficient before the end of the tax year. It’s a great time to get your affairs in order and prepare for the new tax year. Here are 3 things to do before 5th April:
1. Check your salary is tax efficient
Check your annual salary aims have been met before the last payslips of the year are submitted to HMRC. (Once submitted, we can’t make any changes.) If you would like to make changes to your final payslip of the year, contact your Account Manager.
Check your tax code is accurate. Take a look at our guide on tax codes to check your code is correct and to find out what to do if you think it’s wrong.
Don’t miss out on the basic rate tax band! Most employees can draw up to £50,270 in this tax year via salaries and dividends before reaching the higher rate tax threshold.
If you’re an inniAccounts client, open your Personal Tax Planner in your software to see how much you can draw before paying the higher tax rate. Don’t forget to include all your other income and any benefits for the tax year.
When paying dividends, remember to ensure that the dividends are covered by the profits net of expected corporation tax and that you leave enough cash within the business as operating capital to meet your future outgoings.
3. Top up your pension
Company directors can contribute pre-taxed company income to a pension scheme. Employer contributions count as an allowable business expense which lowers your company’s profit, and in turn reduces the amount of corporation tax paid at the end of your company’s year.
Most people can top up their pension by £40k tax-free each tax year. (If you have a very high income or are already receiving pension income, the allowance is reduced.)
The good news is the £40k tax-free pension allowance isn’t a case of “use it or lose it”. Provided that you were a member of a pension scheme in the three previous tax years and you didn’t use the full annual allowance, it is possible to roll this forward to make a higher contribution in a particular tax year.
If you’re setting up a new pension to make contributions this tax year, it must be set up by 5th April.