Year-End Tax Planning

If you’re approaching your business year end, it’s a good time to do some year-end tax planning to reduce your tax bill.

It’s important to appreciate that business accounts are prepared on the accruals basis of monies earned in the year, stocks sold, overheads incurred and equipment purchased, NOT simply according to monies in and monies out. In other words, if the work was done, or the goods were sold in the current year, then you’re taxed on them in the current year, regardless when you get paid or when you pay your suppliers.

If you sell goods, why not defer the sale until immediately after the year end. By doing this, you defer the tax due on the sale by a year. So you will be taxed on that sale in the following year.

If you need to buy some equipment, buy it before the year end so that it goes in this year’s accounts, and reduces this year’s tax bill – get the tax relief a year sooner than you would if you bought the equipment a few days later - in your next accounting period.