Things to do before the end of the tax year
For many contractors, a new personal tax year starts on April 6th. There are some important things that you can do now to minimise the amount of tax you owe and to make the process of paying taxes simpler.
Take company dividends
If you run a limited company, dividends need to be issued and paid by the company before 5th April to be classed as a 2017/18 dividend in your personal self-assessment.
Utilising the tax free dividend allowance is one way of making sure that you are paying tax efficiently. You should also be aware that the tax free allowance is going down from this April, so you will not save as much next tax year.
Bring records up to date
If you are issuing dividends, you need to make sure your accounting records are up to date with expenses, pension contributions, salaries and paid invoices accounted for.
This allows you to make an accurate assessment of profits and tax due so you can calculate your dividend. If you take more dividends than is allowed then you could face penalties and be charged interest.
Maximise you ISA allowance
Want to invest your money to make long term tax-efficient savings? Max out your £20,000 ISA allowance.
You can invest in a cash ISA, stocks and shares ISA, an innovative finance ISA, a lifetime ISA or any combination of these as long as you don’t go over the 2017/18 £20,000 limit. Withdrawn funds can be replaced in the same tax year under Flexible ISA rules.
Top up pension contributions
Pensions are a great way to save because they attract tax relief. Most people get tax relief on contributions up to £40,000 as long as it doesn’t exceed 100% of the value of their annual earnings.
These payments need to be received by your pension provider by 5th April so you may need to act fast.
Make use of your marriage allowance
The marriage allowance allows you to transfer up to £1,150 of your personal allowance of your personal allowance to your husband, wife or civil partner and save up to £230.
It’s possible to transfer your personal allowance as long as one partner earns less than £11,500 and another earns between £11,501 and £45,000. Apply on the Government’s website.
Keep up with upcoming tax changes
There are always a few tax changes in April, and it is likely that a few will affect you. We put together a quick guide to some of the tax changes you need to be aware of this April.
Speak to a professional
Depending on your circumstances, there may be other things you can do to maximise your tax efficiency. Some contractors may be able to save more by operating through an umbrella company.