As the end of the 2022/23 tax year draws closer, there is no time more important to review and reflect on your business’s financial position and security.
With the 5th of April 2023 deadline fast approaching, many company owners will have been using the preceding month to maximise their tax efficiency and prepare their businesses for the forthcoming 2023/24 tax year, commencing as always on the 6th of April.
Spring 2023 Budget: What to Look Out For
The Chancellor of the Exchequer, Jeremy Hunt, presented his Spring budget to Parliament on the 15th of March. Following this, the Office for Budget Responsibility (OBR) published updated economic and fiscal forecasts for the next five years, running up to and beyond the next election.
The Chancellor focused on four key pillars of industrial strategy: supporting business, encouraging more people to work, providing people with skills, and encouraging national growth. The spending announcement included policies on:
Energy support – extending the Energy Price Guarantee until June 2023.
Pension taxation – increasing the tax-free savings private pensioners can make in a year and across a lifetime.
Childcare – extending the 30 hours per week free childcare availability to working families with three and four-year-olds.
Benefits – numerous measures including work coach support for the long-term sick and disabled, work search requirements for lead carers of children on Universal Credit (UC), disability employment support, and work-related conditions to claimants of UC, among others.
Defence – £2 billion per year between 2023/24 and 2027/28, with £3 billion next year, for national security.
Fuel duty – freezing fuel duty rates for a further 12 months.
Capital allowance – allowing businesses to deduct 100% of plant and machinery investment spending immediately when calculating taxable profits.
To ensure you have as many bases covered as possible, here are our recommended six tips to help you, whether you are a limited company director or a self-employed sole trader.
How to Prepare for the New Tax Year
Don’t Miss the Deadline
It’s crucial to ensure that all of your business year-end figures have been completed before the 5th April 2023 deadline. You must ensure these are accurate and have been filed with all the legally required information.
Your statutory (or annual) year-end accounts must include a profit and loss account, detailing all the company’s running costs, sales, and profits and losses made over the last financial year. Additionally, there must be an updated balance sheet, showing all its assets and liabilities as of the last day of the financial year. You should also send HMRC your Company Tax Return (CT600) form, detailing your turnover, expenses, tax allowances, profits and so on.
Make sure you have also reconciled your pension contributions, employee salaries, sales invoices, and expenses with recorded transactions. Remember to only pay dividends from profit earned once you know your corporation tax liabilities.
Be Mindful of Penalties
All companies must send their year-end accounts to Companies House without fail. If you are late submitting your accounts, there are automatic penalties applied, with the severity of the fine dependent on how late the accounts reach Companies House.
Here is a table showing the extent of the penalties associated with late account submissions.
Length of period (from the date the accounts are due)
Penalty for a private company or LLP
Penalty for a public company
Not more than 1 month
More than 1 month but not more than 3 months
More than 3 months but not more than 6 months
More than 6 months
If you don’t file your confirmation statements, annual returns or accounts you will be committing a criminal offence, and opening yourself up to legal proceedings.
Optimise Personal Tax Allowances
Tax allowances are there for you to use, based on your personal circumstances.
You may wish to check whether you could take advantage of any tax relief or allowance schemes to provide your business with additional cash flow or protect future investments.
Whether you are a sole trader or limited company director, you may wish to explore the following allowances that could be available to you:
You may also wish to consider Pension Tax relief or paying money into a tax-efficient bank account like an ISA. It’s worth seeking independent financial advice to ensure you are optimising your tax allowances and preparing appropriately for the forthcoming year.
Paying money into your pension via a limited company is a tax-efficient way to utilise business profits. This strategy means you are reducing your taxable profits and, as a result, any corporation tax liabilities.
You can make pension payments via payroll or in periodic lump sums throughout the tax year. However, be mindful that there are limits on how much you can pay into your pension to still be eligible for Pension Tax relief.
Higher-rate taxpayers may claim additional tax relief on any pension contributions via their Self-Assessment tax return. Also, pension pots can be topped up by £1,000 and higher-rate taxpayers can claim £400 in relief, while basic-rate taxpayers can claim £200. Therefore, it’s worth familiarising yourself with the current threshold for maximum financial security and reassurance.
Automate as Much as Possible
As technology evolves, it offers more opportunities for accurate data gathering, consolidation and reporting. All companies need to ensure that their financial reports are valid, timely, compliant, and accurate, and luckily, there are plenty of tools out there to help companies avoid delays and deadlines, and streamline processes
You can use software and tools to automate core processes such as:
Most of these processes are manual, repetitive and time-consuming, and the hours of time spent here could be put to much more effective and beneficial uses, such as identifying new strategic opportunities, working with clients to optimise efficiency, and so on. You can save yourself and your team plenty of time and stress while mitigating any risks of inaccurate and inconsistent financial information.
Sometimes automation may simply come in the form of hiring a professional third-party accountant, bookkeeper and financial advisor. This can be a much-needed reprieve from balancing finances yourself, when you could be spending that time optimising your business and providing your services.
Set Budgets for the Forthcoming Year
Depending on how long your company has been in business, you should use what data you have collated to set a realistic budget for the financial year ahead.
Examining your previous year’s balance sheet, cash flow management, profits, assets and liabilities, will allow you to make a semi-accurate forecast for your spending.
It’s also prudent to look at business processes and obligations to see if there are any potential cutbacks to be made or any tasks that could be optimised or automated to ensure maximum efficiency. Here are 10 effective ways you can cut business expenses.
You may benefit by assessing the effectiveness of any marketing campaigns you have invested in over the last year. By looking at the data and analytics, you’ll be able to get a clearer indication of how well your investment has paid off, and whether you may benefit from increasing your prices to improve profit margins, and so on.
All of the above information is written for information purposes only. We would always recommend that you speak to a trusted financial advisor or accountant for more accurate and insightful analyses of your current circumstances and requirements.
Get Ahead With Signable
Automating your document signing process is a great way to get ahead of the new financial year by improving efficiency, reducing costs and enhancing your customers’ experience.
Dakota Murphey is a Brighton-based, established freelance writer with experience in business growth and a strong interest in all things digital. Aside from her love of writing, she loves good times with family and friends and admits to being a bit of a film buff.