The second half of 2024 beckons. Businesses must prioritise strategic tax planning to maintain financial stability and ensure compliance with updated regulations.
As ever, the primary onus is on businesses to comply – you’ve got to be proactive about monitoring changes and taking proactive action.
So, read on as we provide essential tips for businesses to optimise their tax planning.
National Insurance Contributions (NIC) Update
The main rate of Class 1 NIC for employees was reduced from 9% to 8% from January 2024. The NI rate for Self-Employed individuals also fell from 9% to 6% from April 2024.
Employers need to update their payroll systems to reflect this change, though the employer NIC rate remains at 13.8%.
This update is crucial for businesses to ensure compliance and accurate payroll processing.
Capital Allowances
Businesses can benefit from capital allowances on qualifying plant and machinery purchases.
The Annual Investment Allowance (AIA) remains at £1 million, and full expensing is available for investments from April 2024 until March 2026.
This allows companies to claim 100% capital allowances on qualifying investments, as TaxAssist Accountants and Global Integra noted.
Businesses can maximise tax savings and improve cash flow by strategically planning capital expenditures.
R&D Relief Scheme Changes
The merger of the Research and Development Expenditure Credit (RDEC) and Small and Medium Enterprises (SME) schemes for R&D relief takes effect from April 2024.
Companies engaging in the new forms of R&D activities should review their projects and documentation to comply with the updated scheme.
If you’ve not explored them now, now is the time to get involved.
Capital Gains Tax (CGT) Planning
The tax-free capital gains allowance halved from £6,000 to £3,000 from April 2024.
Additionally, the higher rate of CGT on residential property disposals will be reduced from 28% to 24%.
Businesses and employees should consider the timing of asset disposals to optimise CGT liabilities.
Dividend Allowances and Remuneration Strategies
The dividend allowance was reduced from £1,000 to £500 in April 2024.
Businesses should reevaluate the balance between salary and dividends to ensure tax efficiency.
Stay Compliant with Digital Tax Requirements
MTD for ITSA will become mandatory for businesses and landlords with annual income above £10,000 from April 2024.
Ensure you have compatible software, and your records are digitally compliant.
Utilising Tax-Efficient Investment Schemes
Investing in schemes like Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS), and Seed Enterprise Investment Schemes (SEIS) can offer considerable tax relief and support business growth.
Speak to a tax accountant if you’re interested in leveraging these schemes.
Reevaluate Off-Payroll Working Rules (IR35)
The IR35 rules aim to ensure that individuals who work like employees pay the same income tax and NICs as employees.
If your business engages contractors, review your arrangements to determine if the IR35 rules apply and make any necessary changes to ensure compliance.
HMRC can be quite hot on IR35 – so take proactive action here to ensure you’re not caught out on this.
Engage with a Professional Tax Advisor
Engaging with a professional tax advisor, such as Hugh Davies, can provide valuable guidance and support in developing an effective tax planning strategy.
Tax experts, like the team at Hugh Davies, can help you identify opportunities for tax savings, ensure compliance with the latest regulations, and optimise your financial position for long-term success.
Contact Hugh Davies for more information about tax planning strategies and how to unlock greater growth and revenue for your business.