Why we all need to invest in tax planning

HM Revenue & Customs (HMRC) operates with a primary objective, that is to recover past government expenditures and utilise the collected funds to repay government borrowing while earmarking resources for future expenses.

In pursuit of this goal, HMRC is mandated to assess taxes by adhering to current legislation, thereby collecting taxes from individuals and businesses.

Essentially, HMRC bases its determination of your tax obligations on data gathered from tax returns, and these figures correspond to historical events. While they strive to grant entitled reliefs and allowances, HMRC lacks the data and personnel to proactively inquire about your future plans or offer advice on optimising your affairs to minimise overall tax liability.

Consider the scenario of a self-employed builder planning to purchase a replacement van in the last month of their accounting year for £20,000. This investment could potentially be deducted against profits for the year, saving £4,000 in basic rate tax. However, if the builder foresees significant profits exceeding £50,000 in the following year due to building a house, it would be prudent to postpone the van purchase to the first month of the new accounting period. This strategic move could result in saving up to £8,000 in higher rate tax.

As we approach the new calendar year, there are just three months left in the 2023-24 tax year. Hence, we are eager to engage in conversations with all our clients to ensure efficient management of your tax affairs. This involves not only reviewing past events but, more crucially, planning for the upcoming 2024-25 tax year.

By doing so, we aim to assist you in minimising your tax footprint. We encourage you to reach out so we can discuss how to best organise your finances to mitigate tax liabilities. Time is of the essence, and we are here to provide guidance, as the clock is ticking.

Get in touch to talk about your upcoming plans.