Friday March 11, 2011

Dear Reader

Planning for the business year end

We're getting close to the end of the tax year, a time when many sole traders have their financial year end. Many limited companies also close their books on 31st March to coincide with the tax year ending on 5th April. It's a good time to be thinking about your business and making plans for the end of the trading year, by looking at ways to influence the final profit. To learn more click here.

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Dividends and the tax year end

In addition to planning for a business year end, limited company owners need to examine their dividend income to maximise their basic rate dividend income. Dividends can be drawn up to and including 5th April 2011 to count in the 2010-11 tax year. To learn more about the process and limits, click here.

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Personal allowance changes

Personal tax allowances increase in 2011-12 to £7475 and the national insurance exemption is also increasing to £7225. This is good news for basic rate tax payers, especially if you run a limited company. It means the tax efficient salary can be increased to a monthly level around £610 giving a small amount of national insurance to be paid. The equivalent salary for 2010-11 would have been approximately £500 per month. If you use the entire tax free allowance via payroll, there is a small tax disadvantage of 4% on earnings above the national insurance exempt limit.

This annual pay increase of £1320 (based on the figures suggested above) will reduce corporation tax by £264 per director shareholder (corporation tax lowering to 20% from April 2011). Given that the government is planning penalties on late payment of tax and national insurance owed by payroll, this additional saving could pay for outsourcing of the payroll service, effectively paid for by HM Revenue and Customs. Call Graham on 01235 86888 for a payroll quote for your business.

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