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It’s important to act before the end of the tax year to help your business save tax legally and ethically.

Tax

Are you self-employed? Does your business prepare its accounts to match the tax year, so to 5th April each year?

If the answer is yes to both questions, here are 5 top tips to help you prepare your business for the end of the year.

Buy your assets sooner rather than later


Are you planning to buy any large pieces of equipment for your business, such as a new computer? If you buy these assets before 5th April instead of after this date, then you’ll be able to claim the tax relief a whole year earlier.

This is especially important this year if you are planning to spend a lot of money on assets. Up until 5th April 2012, businesses can claim tax relief on 100% of the cost of most new assets, using an allowance called the Annual Investment Allowance, up to a value of £100,000 in the tax year – but after 6th April 2012 this will drop to £25,000 for each tax year.

Accelerate your spending – cautiously!


If you’re planning to spend extra on your day-to-day running costs in the near future - such as a new run of letterheads or business cards - again, you should do so before 5th April in order to claim the tax relief a year earlier. Although these items are intended to be used over a prolonged period of time, as long as you purchase and start using them before the April deadline you can put the cost in the current tax year.

However, you do have to be careful here. If any costs relate to after 6th April 2012, then you’ll have to carry them forward and claim tax relief on them later.

For example, if you want to exhibit at a business event in November 2012, and you pay for that bill in March 2012 – the cost would go into the year ended 5th April 2013, because that’s the tax year in which the event itself will take place.

And remember not to spend too much and run out of cash!

Don’t be tempted to defer your business income


It’s tempting to try and move your business’s income into the next tax year, so that you’ll pay the tax on that income a year later. But HM Revenue is wise to this trick!

Income must be included in your accounts depending on when you did the work, not when you raised your invoices or when your customers paid you. So asking your customers to defer payment won’t work, nor will dating all your invoices as 6th April 2012 instead of 1st April 2012.

Register now to file your VAT returns online


Is your business registered for VAT, or will it be soon? From 1st April 2012, all VAT-registered businesses will have to file their VAT returns online, rather than submitting this form by post. They’ll also have to pay any VAT due to HM Revenue online.

Registering to file your VAT returns online is a separate process from registering for VAT. And because HM Revenue have to send you an activation PIN in the post when you register to file your VAT returns online, it’s vital that you don’t wait until the last minute.

If your business is registered for VAT but not yet to file online, register for online filing now! Remember that if you’re using online accounting software such as FreeAgent, this can file your VAT returns online direct to HM Revenue for you – but you must still register with HM Revenue to file them online first.

Bring your books up to date and talk to your accountant


It’s a good idea to make sure your business’s financial records are up to date and to speak to your accountant before the end of the tax year. Every business is different and your accountant may have other suggestions for how you can save tax – but after the year’s end it will be too late to offer these.

For example, you may wish to pay a salary to your spouse or children, but this will be dependent on their other income, and will need a payroll scheme to be set up. Make it easy for your accountant to help you by talking to them before 5th April.

Remember it’s important to act before the end of the tax year to help your business save tax legally and ethically.

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