Proactive tax planning is essential for businesses aiming to maximise their financial efficiency and minimise tax liabilities in the new fiscal year. And now is the time to start, so let’s have a look at what you can do to prepare.

New/upcoming legislative changes

Last autumn, Chancellor Rachel Reeves announced her first Budget statement of this government, which delivered some tax changes that businesses need to be aware of.

Most changes revolved around national insurance contributions (NICs), with secondary Class 1 NICs (paid by employers) rising from 13.8% to 15%. The secondary threshold – the point at which employers pay secondary Class 1 NICs on a given employment – will be reduced from £9,100 to £5,000 a year.

However, “to protect the smallest businesses” from the changes, the employment allowance, which employers can claim to reduce their NIC bills, will be increased from £5,000 to £10,500. Furthermore, businesses that had a secondary Class 1 NIC liability of more than £100,000 in the year prior to the year of their employment allowance claim can now claim the allowance.

You’ll have to take these changes into consideration when planning your business in the future to ensure you allow for the extra costs. You could also consider prioritising freelancers and contractors if the cost of employment is too much.

Use tax allowances and reliefs

You’ll know how important tax planning is, so now is the time to think about what tax allowances and reliefs your business will be able to claim in the future. In particular, you should consider the following.

• Allowable expenses and capital allowances: Businesses can claim the cost of their everyday spending and long-term investments against their pre-tax profit, reducing the amount of tax you owe.

• Research and development (R&D) tax relief: If you run a company that is involved in technological or scientific research, you may be able to claim a portion of your R&D costs.

• Capital gains tax allowance: If you make a profit when selling an asset, you may have to pay capital gains tax. Make sure to claim the allowance to only pay the tax you actually owe.

Implement budgeting tactics

Your tax bill can always total a hefty amount, leaving your business with less money to invest in growth. Knowing how much you may owe and properly budgeting is therefore essential.

To predict what you may owe, you can calculate it based on your previous year’s tax bill. If your income is vastly different, this will obviously be more difficult to do but financial forecasting can be done with the help of a financial adviser. Cloud accounting software that includes Making Tax Digital for income tax (MTD IT) functions will be able to predict your tax bill based on the ongoing income and expense data that you input.

Once you know roughly what your tax bill will be, you should begin budgeting for it right away. That way, you’ll be able to put away an affordable amount each month or so.

You could also build an investment plan, scheduling capital expenditure strategically to benefit as much as possible from available tax reliefs and allowances.

Prioritise accurate recordkeeping

You could also begin to review and reform your record-keeping processes, which will make your financial and tax planning far easier in the future. After all, your tax returns, budgets, forecasting and business planning requires accurate and easily accessible data. To make sure you have that, make sure to do the following.

• Organise all financial documents: Maintain records of invoices, receipts and bank statements. When one comes up, make sure it’s added to your files.

• Use digital tools: You can use accounting software to track income and expenses in real time, ensuring accuracy of data and reducing manual effort.

• Retain records for HMRC: It’s important to keep all relevant documents for at least six years, as required by HMRC regulations. This will help you interact with authorities if a discrepancy in your records is noticed.

Seek professional guidance

Proactive tax planning is not just about reducing your tax liabilities; it’s about setting your business up for long-term success. By understanding the latest legislative changes, leveraging available allowances and reliefs, and implementing sound budgeting and recordkeeping strategies, you’ll ensure your business is financially prepared for the year ahead.

The earlier you start planning, the better positioned you’ll be to seize opportunities, mitigate risks, and maintain healthy cash flow. With rising costs and an evolving tax landscape, this is not the time to leave things to chance. Whether it’s forecasting your tax obligations, optimising capital expenditure, or ensuring compliance with HMRC requirements, every step you take now will pay dividends in the future.

Most importantly, don’t underestimate the value of professional advice. A skilled accountant or tax expert can be an invaluable partner, helping you navigate complexities, identify opportunities, and provide tailored advice that aligns with your goals. Tax planning isn’t just a once-a-year task – it’s a strategic process that demands regular attention and adjustment.

If you’re ready to take control of your tax planning and secure your business’s financial health, we’re here to help.

Get in touch to talk to us about your tax plans.