A little forward planning can make a big difference to your tax bill.
It’s easy to think of your accountant as the person you speak to when your tax return is due. But some of the most valuable conversations happen before the tax year ends.
Recently, we reviewed one of our client’s tax position during the year and spotted an opportunity to make a significant difference to his tax bill.
The result? £2,933.06 in tax saved.
What did we do?
Our client was approaching the higher-rate tax threshold.
After reviewing his expected income for the year, we advised him to make a pension contribution.
By putting the money into his pension, we were able to keep his taxable income within the basic-rate tax band.
This meant he avoided paying the higher rate of tax on that portion of his income.
The result was a tax saving of £2,933.06.
And importantly, the money didn’t simply disappear in tax. It was put towards his pension, helping him save for his future while also making his tax position more efficient.
Why did timing matter?
This is where tax planning can really make a difference.
The opportunity was identified during the tax year, while there was still time for our client to take action.
If we’d only looked at the numbers after the tax year had ended, it would have been too late to make this particular change for that year.
That’s why we encourage our clients to check in with us throughout the year, rather than waiting until their tax return is being prepared.
Your accountant shouldn’t just appear at tax return time
At JDH, we believe good accountancy is about more than looking backwards at what has already happened.
It’s about looking ahead too.
By keeping an eye on your expected income and tax position during the year, we can help identify opportunities to plan ahead and make informed decisions before deadlines pass.
That might involve pension contributions, allowances, tax reliefs or other planning opportunities, depending on your individual circumstances.
Of course, tax planning isn’t one-size-fits-all. What works for one person may not be appropriate for another, which is why professional advice based on your own circumstances is important.
Could tax planning save you money?
The best time to ask your accountant about tax planning is before the end of the tax year, not after it.
So, if you’re self-employed or run a limited company, why not ask:
“What can I do before 5 April to make my tax position more efficient?”
It could be a very worthwhile conversation.
In our client’s case, that conversation resulted in £2,933.06 staying out of the higher-rate tax band and going towards his pension instead.
At JDH Accountants & Business Advisers, we want to take the stress off your accounts and help you make informed decisions about your finances — so you can get back to doing what you do best.
Want to talk about your tax planning? Get in touch with the JDH team.