My Accountant will sort my tax out – OR WILL THEY?

My Accountant will sort my tax out – OR WILL THEY?

17th October 2022 was the 35th anniversary of Black Monday, following the great
storm of 1987.

You could say history is repeating itself.

A new chancellor, Jeremy Hunt, was appointed on Friday 14th October and this followed by a full U-Turn on Monday.
tax accounting 1
What does it all mean for SME’s (and their accountants)? Well the one thing it doesn’t mean is business as usual!

It may not feel like it yet, because it hasn’t happened, but tax is going up for us
SMEs, but not just up a bit.
 
For a reasonably profitable SME (between 50K and
300K), the marginal (decision making) tax rate is jumping almost 40%.

From 19% to a marginal rate of 26.5%.

The Government is also keeping its increase to dividend tax, which was brought in to match the NI increase, even though the NI increase is still being scrapped.

A major consequence of making the business tax system more complicated is
that decisions that were tax neutral before, could be very costly in future.
 
emi share options
What can you do now to help yourself.

1. Make sure you reward yourself correctly in 2023/24. With the changes to the rules it’s highly likely that you should be taking salary rather than dividend,
to take your taxable profits down to £50K.

2. Think about how you use historic losses. If you have losses from previous
years, it might be better to use them in 2023 and beyond and save at
higher rates (26.5% or 25%) rather than 19% now.
 
3. Tidy up your business structures. Many businesses have minor trading
subsidiaries or other companies they own on the side. Under the new rules
(assuming it doesnt change again) the limits are spread across the number of companies you own, so you could find yourself paying 26.5% tax instead of 19%.

Book onto a Discovery Call if you would like support for your business to navigate
these changes. Or find out more about our accountancy services.

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