Tax is one of those topics that can either be a tool to build your business or a hurdle that holds you back.
The difference often comes down to how proactive you are in your planning.
With every Budget announcement and HMRC update, the rules change, and the opportunities evolve.
The key is to stay ahead of these changes, not just react to them.
What are the benefits of proactive tax planning?
Dealing with tax isn’t anyone’s favourite task. But if done right, it can save your business money, boost your cash flow, and even protect your business from unexpected penalties.
Plus, there’s something empowering about knowing you’re taking control rather than being at the mercy of the latest tax rule changes.
“Proactive tax planning is about future-proofing your business,” comments Lucy Shepherd, Manager at Rotherham Taylor. “Every time the tax rules change, there’s a chance to adapt, rather than getting caught off guard.”
So, why be proactive? Because it puts us in the driver’s seat. It allows us to:
- Minimise tax liabilities
- Optimise cash flow
- Stay compliant
- Reduce stress
Key strategies to get ahead with tax
Let’s break down some of the strategies that can help us stay one step ahead.
Make the most of reliefs and credits
There are so many reliefs out there that businesses either don’t know about or don’t think they qualify for.
Take R&D tax credits, for example. A lot of businesses hear ‘R&D’ and immediately assume it’s not relevant, but research and development come in many forms.
“Many businesses are already doing R&D without realising it,” Lucy comments. “Proactive planning means we can spot those opportunities and claim what’s rightfully ours.”
Other reliefs like capital allowances (for things like machinery) and the Patent Box (for innovations) are also powerful tools that can reduce tax bills.
Think about timing
Timing is everything in tax. This can come in the form of accelerating certain expenses into this financial year to get a deduction now, or deferring income to a year where we might be in a lower tax band.
In either case, careful timing can make a real difference to how much tax is paid.
Get smart with remuneration
For owner-managed businesses, the big question is how income is taken.
Salary, dividends, benefits in kind?
Each option has different tax consequences.
“A well-thought-out mix can reduce overall liability and make sure owner-managed businesses are getting the most value for their efforts,” says Lucy.
Use losses to our advantage
If a business is facing losses, perhaps due to a tough year, then those losses don’t have to be wasted.
“Losses can be carried back to offset past profits and get a refund on taxes already paid,” adds Lucy. “Or, if the business is part of a group, group relief lets the business use those losses elsewhere in the company. It’s all about making sure nothing goes to waste.”
Review the business structure regularly
One question we are asked regularly is one of business structure. Should your business be a limited company, a partnership, or perhaps a group with a holding company?
The structure chosen can have a big impact on tax efficiency.
“Sometimes the best move a business can make is to restructure,” suggests Lucy. “It could unlock tax efficiencies and put the business in a better place in terms of a long-term strategy. Each business structure has its own advantages depending on the situation you are in, so we’d always recommend speaking with us first before making any decisions.”
Pension contributions
Pension contributions are a smart way to reduce taxable profits. Plus, they’re a valuable benefit for employees and directors. It’s tax-efficient compensation, and it helps secure the future.
Get strategic with VAT
VAT can feel like a pain, but there are ways to make it easier.
“For instance, using the Cash Accounting Scheme means businesses only pay VAT when they have been paid by their customers,” says Lucy. “It’s a simple change, but one that can make a big difference to cash flow. It is all about finding the right fit for the business.”
Employee share schemes
For businesses that want to incentivise staff, tax-advantaged share schemes like the Enterprise Management Incentive (EMI) are a win-win.
They’re tax-efficient, and they help align employees’ interests with the business’s success.
Why being proactive makes all the difference
With constant changes to tax regulations and thresholds, it’s easy for businesses to get caught off guard if they are not paying attention.
But by being proactive, it means that instead of scrambling to respond to each new Budget or HMRC update, businesses can be ready and prepared, turning tax from a burden into an advantage.
As Lucy puts it:
“The earlier we take action, the more choices we have. Those choices mean more control over our tax bill and our business’s future.”
Get in touch with Rotherham Taylor today, and let’s talk about how we can make tax work for your business.