Tax Tips

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by Pete Bird, Bird & Co, Certified Public Accountants

TAX TIP 13 MAKE THE MOST OF YOUR ISA ALLOWANCE Everyone can take advantage of their annual tax-free ISA allowance. For the 2021/2022 tax year, you can deposit up to £20,000 into ISA accounts. This is unchanged from 2020/2021. This can all be put in a cash ISA, a stocks and shares ISA, or split between both cash and stocks and shares. TAX TIP 14 TAX-DEDUCTIBLE EXPENSES Many expenses incurred while running your business can be deducted from your profits, reducing your overall tax. This could include things like fuel, phone costs, or running costs for your home office and may more that we would be quite to discuss these with you. TAX TIP 15 SELF-EMPLOYED CAR COSTS You can generally claim the running costs of a car you use for business. If you use the same car for your private use, you can claim a proportion of the total costs. To do this, you'll need to either add up all of your motor expenses for the year and work out the percentage of business miles you did, or you can claim a fixed rate mileage allowance for business travel.

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CASH-FLOW BOOST FOR SELF-EMPLOYED As a business owner, you can choose when your accounting year ends - and it's worth choosing carefully. If you pick an accounting year-end date earlier in the tax year, you'll have more time to pay tax on your profits. This means that as your profits increase, your tax bill will rise more slowly. However, be care if the period covered by the accounts cover two tax years as this may give rise to overlap profits, so professional help should be taken. NOTE: However, be careful as there is a HMRC consultation that ends on 31 August 2021 with a proposal to simplify the basis periods for self assessment that may affect tax payers that do not have a 31 March or 5 April year end. We will publish more details when known after the consultation.

ANNUAL LOSSES If you make a loss in one tax year, you can carry it forward and offset it against profits from a

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future year. There is an option to carry it back and set against previous profits as well. This decreases your taxable income. TAX TIP 18 PAYMENTS ON ACCOUNT Generally, self-employed people will be required to pay tax in two advance payments one in January and then July following. The amount you'll pay will be based on the previous year's tax bill. So, if you expect to earn less one tax year than in the year before, you can apply to reduce your payments on account. You'll need to submit form SA303, either online or via mail to HMRC TAX TIP 19 DIVIDEND ALLOWANCE Each year, you can earn a certain amount of income from dividends before paying tax. This was reduced on 6 April 2018 - but you can still earn up to £2,000 in dividend income without paying tax each year. You could also consider allotting share(s) to your nearest and dearest to take advantage of this tax free amount.

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