Tax does not have to be the headache that many businesses think it is.
In fact, with the right approach, tax planning can become a powerful tool to help your business grow rather than an obstacle to overcome.
The key to making this happen? Being proactive.
With every new Budget and HMRC update, fresh opportunities open up for businesses to take advantage of.
Conversely, changes can also bring potential challenges.
The businesses that thrive are those that stay ahead of these changes instead of scrambling to catch up.
Why proactive tax planning matters
Tax is rarely at the top of anyone’s to-do list, but putting in the effort to plan ahead can pay off in a big way.
Not only can proactive tax planning save your business money, but it can also improve cash flow and shield you from unexpected penalties.
There is something empowering about taking control, rather than being at the mercy of the latest tax changes.
As Darren Specterman, Partner at Glazers, explains: “Proactive tax planning is about future-proofing your business. Each time the tax rules shift, you have the opportunity to adapt and come out stronger, rather than being caught off guard.”
By staying ahead, you can:
- Minimise tax liabilities
- Optimise cash flow
- Stay compliant with regulations
- Reduce stress and uncertainty
Budget implications and tax strategies to stay ahead
The Budget, due to be announced by Chancellor Rachel Reeves on 30 October, is likely to see changes to key areas of tax that will impact businesses.
Here are some potential changes and the strategies you can implement to plan accordingly.
Capital Gains Tax
There is growing speculation that Capital Gains Tax (CGT) rates could rise to align with Income Tax rates.
This could mean a significant increase in tax liabilities for investors and business owners selling assets.
The removal or reduction of the tax-free CGT allowance, currently set at £3,000, is also a possibility.
“CGT is a probable target for the Government, so it is a good idea to review your investment strategy now,” advises Darren. “If you are considering selling assets, it may be wise to accelerate those plans before any CGT changes take effect.
“Business owners should also think about Business Asset Disposal Relief, which offers a reduced 10 per cent CGT rate on the first £1 million of qualifying gains. The potential removal of this relief could make selling a business far less attractive, so plan accordingly.”
Inheritance Tax
Inheritance Tax (IHT) changes are another potential target, with Labour considering reducing exemptions or lowering the threshold at which IHT becomes payable. This could bring more estates into the IHT net, including family businesses and agricultural property.
“If your estate includes business assets or agricultural land, now is the time to review your estate planning,” mentions Darren. “Consider gifting assets sooner rather than later, as a potential extension of the seven-year rule for IHT on gifts could increase future tax liabilities.”
Pensions
Pension reforms are frequently discussed, and although a flat rate of pension tax relief seems less likely now, there could still be adjustments to the annual pension allowance or the 25 per cent tax-free lump sum.
“Maximise your pension contributions while the annual allowance remains at £60,000,” says Darren. “Pensions are a tax-efficient way to build wealth, especially for higher earners, but changes could limit this in the future.
“Business owners should also consider offering more attractive pension schemes to employees as a tax-efficient benefit.”
Dividend tax
Dividends have been a popular and tax-efficient way for business owners and investors to receive income.
However, the dividend allowance has already been cut to £500, and Labour could reduce it even further.
“Review how you take income from your business,” comments Darren. “With the potential for further cuts to the dividend allowance, you may need to reconsider the balance between salary and dividends to optimise your tax position. Taking proactive steps to restructure how income is distributed could help reduce future liabilities.”
Inflation and broader economic concerns
The Budget is also expected to address inflation, with potential tax rises and spending cuts aimed at controlling rising prices.
However, such measures could impact business growth and consumer spending.
Keep a close eye on your business’s cash flow and prepare for possible economic slowdown.
“Proactive tax planning, such as accelerating expenses into this financial year or deferring income, can help manage cash flow and reduce tax liabilities during periods of economic uncertainty,” says Darren.
Why being proactive makes all the difference
With constant changes to tax regulations and thresholds, it is easy for businesses to get caught off guard if they are not paying attention.
“If businesses are proactive, it means that instead of scrambling to respond to each new Budget or HMRC update, they can be ready and prepared, turning tax from a burden into an advantage,” says Darren.
As Darren explains: “The earlier you act, the more options you have. By planning ahead, you gain more control over your tax bill and, ultimately, your business’s future.”
Ready to take control of your tax strategy? Get in touch with Glazers today, and let’s make tax work for your business.
