Year-end tax planning tips for UK businesses

Tax and National Insurance 

Navigate Capital Gains Tax adjustments 

The Capital Gains Tax (CGT) Annual Exempt Amount (AEA) is changing for the 2024/25 tax year, affecting sole trader and partnership businesses and trusts. The AEA from April 2024 is £3,000 or £1,500 for businesses and trusts respectively. Effective planning is essential if you are selling assets subject to CGT, speak to your accountant who can look at the implications of disposals based on differing dates and proceeds values. CGT is not payable by incorporated companies. 

Update for National Insurance Contribution changes 

Following the Autumn Statement 2023, the main rate of Class 1 National Insurance Contributions (NIC) for employees has been reduced from 9% to 8%. The changes applied from January 2024 and employers must ensure their payroll systems reflect this change. The Employer NIC rate remains unchanged at 13.8%. 

Capitalise on Capital Allowances 

Tax savings on qualifying plant and machinery purchases are possible through capital allowances. It’s important to know what relief your business is entitled to, speak to your accountant about any purchases to determine what you can get. 

• Annual Investment Allowance (AIA) remains at a limit of £1 million and is available on eligible purchases of plant and machinery  
• First Year Allowance (FYA) is available on certain assets such as electric cars and zero-emissions goods vehicles. 
• Temporary first year allowances may also be available (only to companies), including ‘full expensing’ which is available from April 2024 until March 2026. Full expensing means companies can claim 100% capital allowances on qualifying plant and machinery investments. The special rate allowance gives companies 50% relief from profits before tax on new items that would fall in the special rate pool.  

R&D Relief Scheme merger 

The merger of the Research and Development Expenditure Credit (RDEC) and Small and Medium Enterprises (SME) schemes for R&D relief takes effect for accounting periods starting on or after 1st April 2024. Businesses should familiarise themselves with the new requirements to ensure eligibility. 

Deductible expenses 

Maximising deductible expenses is a key tax planning strategy. Staying abreast of what expenses are allowable and keeping good accounting records is necessary to ensure that expenses can be included in your accounts and tax savings are possible. 

Business structure 

You should continually evaluate your business structure and reevaluate the benefits of incorporating or even disincorporating, as there may be tax savings opportunities. If it wasn’t right for you to make a change last year, it may be the right time now! 

Anticipate political changes 

With the UK General Election in 2024, businesses should be prepared for potential unexpected changes, including VAT threshold adjustments or tax abolitions.  

Corporation tax rate 

Corporation tax rates for the upcoming period remain at 25% and 19%, with marginal relief available for some companies. 

Accounts 

Prepare for basis period reform 

Unincorporated businesses with an accounting year end that doesn't align with the tax year need to be ready for the basis period reform. Starting for accounting periods after 1st April 2024, these businesses will report and pay taxes based on the tax year rather than their accounts year. If you have a non-March year end, you should speak to your accountant about the adjustment required. 

Company year-end considerations 

Incorporated businesses are not impacted by the basis period reform, so these companies will have the same requirements and deadlines. Make sure you keep on top of reporting requirements and deadlines. 

Embrace the cash basis 

From 6th April 2024, the cash basis for accounting becomes accessible to all businesses, regardless of turnover. The cash basis accounting method accounts for income and expenses based on the payment date, offering a more straightforward approach to managing finances. Going forward it will be the default method of accounting, but businesses can choose to apply the accruals method. 

Regulations 

Companies House reporting changes 

Businesses should be aware of reporting changes coming from Companies House. These changes will affect small and micro businesses who will see changes the accounts that Companies House require to be filed. While the exact timeline is pending, these changes could include the end of abridged and filleted accounts and adjustments to registered office rules. 

Employer 

Plan for National Living Wage Increase 

The National Living Wage is rising by 9.8% from 1st April 2024 and will now apply to workers aged 21 and over (previously aged 23 and over). Businesses must budget for this increase, which could significantly impact finances, especially for those with numerous employees. 

Utilise the Employment Allowance 

Eligible employers can reduce their annual National Insurance (NI) liability by up to £5,000 with the employment allowance. However, restrictions apply, such as the previous tax year's Class 1 NIC liability must be below £100,000. 

Making Tax Digital 

Get Ready for Making Tax Digital for Income Tax Self Assessment 

Businesses must prepare for Making Tax Digital (MTD), which means digital record-keeping and quarterly updates to HMRC for some businesses. While VAT registered businesses will already comply with MTD for VAT, MTD for Income Tax Self-Assessment (ITSA) is coming too. The deadlines for compliance vary based on income levels, with sole traders and landlords needing to comply by April 2026 or April 2027, depending on their income. 

While MTD for Corporation Tax (CT) and general partnerships has not been announced it is expected there will be an announcement in due course. 

How can TaxAssist Accountants help?  

Our proactive and qualified team at TaxAssist Accountants can help you to plan for business tax effectively. To discuss your options further, speak to our expert team today on 01202 122272 or use our online contact form.  

Date published 28 Feb 2024 | Last updated 12 Mar 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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