Pre-Year-End Checklist For Limited Companies. What You Should Do And How To Reduce Your Tax Bill.
Year-end for limited companies can be daunting. That’s why some business owners put it off till the last minute. As accountants and business owners ourselves we definitely don’t recommend it. Your legal obligations as a limited company director aren’t going to go away and doing things just before the deadlines poses more risks.
And we wouldn’t be ourselves if we didn’t mention that staying on top of your finances and bookkeeping on a regular basis instead of leaving things till the year-end is going to make things less daunting. And there will be no panic.
Whether your bookkeeping is up to date or whether you are still tackling posting, reposting and reconciling, this pre-year-end checklist for limited companies is going to make your life so much easier.
We divided this checklist into two sections: Things to review and How to reduce your tax bill.
Let’s dive in.
Things to review before or just after the year-end - checklist for limited companies
Complete all outstanding bookkeeping – you may not be there yet, but we believe in you. You can definitely do it. Our article on bookkeeping for limited companies can help with that. If we are your bookkeeping provider, we have this covered for you.
Review your debtors – check which clients haven’t paid you yet and issue reminders for payments. Clearing your debtors to nil for the year-end isn’t a must but this will help you improve your cash flow. From the year-end perspective and preparing your annual accounts, it will help you identify the invoices that will never be paid and will need writing off as irrecoverable debt. If you’re not sure how to do this, your accountant will help you with a technical side of things. This task shouldn’t be strictly reserved for the year-end. It’s good to do this review more regularly.
Review your creditors – check which invoices from your suppliers you haven’t paid yet. Maybe some are being disputed or maybe some should have credit notes applied to them. Chase your suppliers for those if that’s the case. This task will also help you identify any missing invoices. This will help you tidy up the accounts for the year-end. As with the task above, it’s good to do this task on a more regular basis. It will also help you review whether it’s still good to have a relationship with certain suppliers.
Review your assets – check if the assets you purchased are still in use, haven’t been sold and whether they are still in a usable condition. If anything is missing in your accounts (in your accounting software), make sure this gets rectified. If you disposed of any assets, flag this to your accountant, so they can do the necessary postings in your accounts for the year-end. Look for any impairment of your assets and make sure these aren’t carried in your accounts if their value in your accounts is above their recoverable value. Check with your accountant if you’re not sure about this.
Count your stock – make sure your figure agrees with your records in the accounting software. Flag any discrepancies to your accountant. We recommend checking your stock on a regular basis. This will make the year-end work much easier but reviewing your stock regularly can give you lots of useful information and help you spot saving possibilities on a more regular basis.
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How to reduce your corporation tax bill – checklist for limited companies
Make a pension contribution – pension contributions are an allowable business expense and hence a great way of reducing your company’s tax bill. If you’re a company director, consider making a lump sum contribution to your pension pot before the year-end.
Make a charity donation – making a donation to a charity is both a great way of reducing your corporation tax bill but also contributing to a good cause that you believe in and want to support. You can donate money but also equipment, land or property. If you choose to donate money, this cannot be under conditions that it will be repaid or that a charity will have to buy property from you. You can also make a donation to a community amateur sports club.
Claim for working from home expenses – if you work from home on a more regular basis or occasionally, make sure you claim for working from home expenses. You can either use an HMRC flat rate or calculate an actual cost. If you work from home quite often, the actual cost method can bring higher tax savings for the business, but it can be more complex and time-consuming to calculate. You also need to make sure you have all the invoices and receipts when claiming the working from home expenses using this method.
Utilise capital allowances – if you need business vehicles, equipment or machinery, you may consider investing in these before the-year end. Capital allowances offer a tax relief for businesses and will reduce your corporation tax bill. With annual investment allowance for example you can claim up to £1 million on qualifying plant and machinery. Make sure the investment you want to make qualifies for capital allowances.
Optimise your director’s salary – if you want to avoid paying employer’s national insurance but at the same time you would want to make higher corporation tax savings, you may consider paying a director’s salary up to the National Insurance secondary threshold if it’s currently below (please refer to the HMRC website for the most up to date National Insurance rates and thresholds).
Why not get in touch with our professional Oxford accounting team today to see how they can help you and your business achieve its potential.
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