Year-end tax planning is essential for every business in Scotland, no matter their size or industry, so they can ensure they can save as much money as possible while remaining compliant with their tax duties. However, tax planning should never be done at the last moment, as the rush could cause you to miss details or make mistakes.
To help you get started with your year-end tax planning as soon as possible, we’ve put together this guide, which will take you through the fundamentals of tax planning for Scottish businesses.
Use your tax-free allowances
Tax-free allowances are a valuable tool for minimising your tax liability and maximising your savings. In Scotland, businesses can take advantage of various allowances to reduce taxable income.
- Personal allowance: Sole traders and partnerships benefit from the same personal allowance as the rest of the UK – the first £12,570 of their income is protected from income tax if they claim the allowance.
- Employment allowance: This allows eligible employers to reduce their national insurance liability by up to £5,000 in the 2024/25 tax year.
- Capital gains tax allowance: If you make a profit when selling an asset or property, you may have to pay capital gains tax. As of 2024/25, you do not have to pay tax on the first £3,000. As companies pay corporation tax on capital gains, they do not benefit from this allowance.
While “claim your tax-free allowances” might seem like an obvious suggestion, the point is that you usually have to claim them yourself to benefit.
Apply available tax reliefs
Depending on your business and its functions, there may be a number of tax reliefs that you can claim to reduce your tax bill. Here are the reliefs that may be available to you.
- Research and development (R&D) tax credits: If you run a company that is involved in innovative projects in science or technology (they don’t necessarily need to be successful), you may be able to claim R&D tax relief.
- Gift aid: Companies can claim tax relief for qualifying donations paid to charities.
- Reclaiming VAT: If you are a VAT-registered business, you can reclaim the VAT you pay on items for use in your business.
- Creative industry tax relief: If you run a company in the creative industry, such as film, animation or video games, you are able to claim corporation tax relief.
- Allowable expenses: You can deduct the value of day-to-day expenses (allowable expenses) from your pre-tax, reducing the tax you ultimately owe to HMRC.
- Capital expenditure: Companies can claim capital allowances on certain purchases or investments, such as equipment, machinery and business vehicles.
Adopt good tax practices
While claiming allowances and tax reliefs will help you reduce your tax liability, it’s important to adopt simple tax planning practices that will keep you compliant and support your claims.
- Start early: Always begin tax planning well before the end of the financial year to avoid last-minute stress and ensure thorough preparation.
- Keep accurate records: Maintain detailed and accurate financial records to support all claims for expenses and allowances.
- Budget for tax payments: Set aside funds regularly to cover expected tax payments, avoiding cashflow issues when tax bills are due.
- Consult with an accountant: Engage with a professional accountant to get expert advice tailored to your business needs and to ensure compliance with tax laws.
If you need help with your year-end tax planning, get in touch with us. As tax accountants who specialise in tax strategising and planning, we’ll do our best to help you fulfil your obligations and reduce your bill.