Tax and VAT planning for small businesses

by | Sep 9, 2020 | Blog, VAT

At the height of the coronavirus pandemic, with the UK in lockdown, business tax planning was not a high priority with many owners simply seeking to survive.

Clearly, that was incredibly important, but with the second half of the 2020/21 tax year around the corner, firms are realising now is the time to review their tax-planning strategies.

You can certainly understand why when unclaimed tax reliefs or unused allowances cost business owners billions of pounds each year, and a lack of awareness resulting in many legitimate opportunities to save money on tax being lost.

Good tax and VAT planning can help any small business find areas to save money on tax – cash which can then be reinvested elsewhere in the business. But there are other equally compelling reasons to take tax planning seriously, such as ensuring you comply with HMRC’s rules and regulations.

Business structure

Don’t be lured into thinking you only need to ponder how your business is structured when you start working for yourself. You could miss out on valuable tax reliefs or allowances to significantly reduce your bill.

Take buy-to-let landlords, for example. Those who continue to operate as a sole trader or in a partnership in 2020/21 receive a basic-rate reduction from their income tax liability for their finance costs.

Before April 2017, residential landlords with higher incomes benefitted from a generous tax break which enabled them to offset all their finance costs from their property income to arrive at their property profits figure.

As a result, an increasing number of buy-to-let landlords have switched to limited companies because the measure does not apply to them. It’s no surprise limited companies continue to dominate the purchase market.

We can provide specialist support when buying residential properties as a limited company, or if you are considering switching to limited company status as there are considerable costs involved.

Corporation tax

If you do go down the limited company route, your company will be liable to pay corporation tax at 19% on any profits made in the company’s accounting period.

Much like self-assessment and the process of submitting a personal tax return, your company needs to register for corporation tax in order to file a company tax return. The deadline is 12 months after the end of your accounting period.

When your company registers for corporation tax, HMRC will send you dates for your company’s accounting period which spans a 12-month period. This can be different to the fixed dates of a tax year.

The main rate of corporation tax could be set to rise from 19% to 24%  in April 2021 to help reduce the UK’s COVID-19 debt. Any change will be announced in the Chancellor’s next Budget speech.

VAT health check

You have to pay VAT if your business – regardless of whether it operates as a sole trader, partnership or limited company – has annual taxable turnover of more than £85,000.

At Dunkley’s, we have a team of experts who can review your procedures and processes to potentially identify opportunities to improve your VAT position.

From talking you through the partial exemption method and the VAT recovery procedure, to considering which scheme best suits your business when it comes to accounting for VAT, we can help.

Our VAT planning service  is about highlighting potential areas for concern, and areas to save money. To find out more or for expert help, get in touch with us at or on 01454 619900.

What can we do for you?

If there’s anything you’d like to know about Dunkley’s, we’d love to hear from you.