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New Tax Year resolutions - news article image

New Tax Year resolutions

25 Jan 2019

2 minute read

When people ask me what I do for a living and I tell them that I am a Chartered Certified Accountant, people will often joke that January is the only month that I must actually do some work! As much as I wish I only had to work one month out of 12 that is far from the truth. 

January was a very busy month as we were preparing and filing self-assessment tax returns close to the deadline of 31 January. February and March are different however as in this two month window I am reviewing my client’s tax affairs before we begin a new tax year which will begin on 6 April 2019 and run until 5 April 2020. 

Back in October, the Chancellor Philip Hammond presented his Budget which saw changes coming into effect that next day (i.e. increased duties on cigarettes) and other changes which come into effect on the first day of the new tax year. 

The headline news is seemingly always the rates and thresholds of income tax. This generally affects everyone earning an income, as opposed to Inheritance Tax which will affect a smaller proportion of the population. 

The good news is that the Personal Allowance amount is increasing from £11,850 to £12,500. This will save most Basic Rate Taxpayers £130 during the course of the tax year. The Basic Rate Band whereby we pay tax at 20% as opposed to 40% is also increasing from a limit of £34,500 to £37,500. There was no change to the threshold at which we pay income tax at 45% which remains at £150,000. 

The build up to a new tax year should serve as a reminder to both an accountant and their client to perform a thorough health check of the business and when considered with changes to tax rates, thresholds, restrictions and opportunities ensure that their affairs are in order and that they are set up as tax efficiently as possible. This may be changing the way business owners pay themselves or to review whether a business should be incorporated as a limited company or not. 

I recently had a meeting with a client who was considering spending some extra money in their business to help it grow. We discussed the business finances and personal circumstances and were able to establish that in their instance, it would be better to incur certain expenditure before the start of the new tax year because the benefits of tax relief would be greater than after the start of the new tax year. 

Most of us begin the new calendar year with a host of New Year’s Resolutions. Whilst reviewing your business and tax affairs may not rank highly with joining a gym, quitting a bad habit or becoming healthier, it should be something you do act on as the benefits could be equally as rewarding.

New Tax Year resolutions - news article image


Gary Hamilton

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