Tax Tips for the New Year: How to Get Your Finances in Shape for 2025
As we head into 2025, it’s the perfect time for small business owners in the UK to review their finances and prepare for the year ahead. By taking a little time now, you can make tax season easier and ensure your business is on track to save where it can. Here are some practical tax tips to help get your finances in order for 2025.
1. Organise your business records
One of the best ways to prepare for tax season is to keep your records accurate and up-to-date throughout the year. Good record-keeping means you can file your tax return smoothly and reduce the chance of missing any eligible expenses. To get started:
- Make sure your income and expenses are logged correctly.
- Store all receipts, invoices, and bank statements in an organised way.
- If you’re using accounting software like Xero or QuickBooks, review your entries to ensure everything is in order.
A little effort now can save a lot of time and stress later.
2. Maximise tax deductions and allowances
It’s important to take full advantage of any tax deductions or allowances available to your business. In 2024/2025, there are a few key areas where you could save:
- Annual Investment Allowance (AIA): For the 2024/2025 tax year, you can claim 100% tax relief on investments in equipment or machinery, up to £1 million. This can be a great opportunity to invest in your business and reduce your taxable profit.
- Allowable Expenses: From office supplies and travel costs to business insurance and wages, make sure you’re claiming all of your allowable business expenses to lower your tax bill.
Reviewing your expenses regularly ensures you don’t miss out on anything.
3. Stay on top of tax reliefs and grants
The UK government offers a range of tax reliefs and grants to support small businesses, so it’s worth staying informed. Some options for 2024/2025 include:
- Research and Development (R&D) Tax Credits: If your business is developing new products or services, you may qualify for R&D tax credits, which can help offset some of your costs.
- Small Business Rate Relief: If your business occupies a property with a low rateable value, you may be eligible for relief on business rates.
- Green Tax Reliefs: Investing in energy-efficient equipment or green technologies might qualify you for tax incentives.
Make sure to regularly check for new reliefs or grants that could benefit your business.
4. Prepare for your Self-Assessment tax return
If you're a sole trader or partner, your self-assessment tax return is due by 31 January 2025. Here’s how to stay on top of it:
- Organise your income and expenses well in advance to avoid last-minute stress.
- Make sure all allowable business expenses are included to reduce your taxable income.
- Check your previous tax return for any inconsistencies to ensure everything is accurate.
If you're unsure about anything or want to avoid mistakes, consider working with an accountant to get it right.
5. Plan for National Insurance contributions (NICs)
National Insurance Contributions are another important part of your tax planning. Whether you're a sole trader or run a limited company, here’s what you need to know:
- Sole Traders: You’ll need to pay Class 2 and Class 4 NICs, based on your profits.
- Limited Companies: Employer NICs will apply if your employees earn above a certain threshold.
Make sure you account for NICs when planning your cash flow, so you’re not caught off guard when payment time comes.
6. Consider pension contributions
Pension contributions are a smart way to save on taxes while preparing for the future. As a business owner, you can:
- Contribute to your own pension and receive tax relief.
- Contribute to your employees’ pensions as part of your workplace scheme, which can also help reduce your corporation tax bill.
If you’re considering making pension contributions, it’s best to do so before the end of the tax year (5 April 2025) to take advantage of the tax relief available.
7. Set clear financial goals for 2025
The start of the year is the perfect time to review your business’s financial goals. Think about:
- Setting revenue and cash flow targets for 2025.
- Reviewing your pricing strategy to ensure it’s aligned with your business goals.
- Budgeting for tax payments to avoid any surprises.
Having clear goals in place will help you stay focused and make better financial decisions throughout the year.
8. Review your business structure
As your business evolves, it’s worth considering whether your current business structure is still the best choice. If you're a sole trader, incorporating as a limited company could provide tax advantages, such as paying yourself through a combination of salary and dividends. This could be more tax-efficient as your business grows.
Reviewing your business structure with an accountant can ensure you’re making the most of the available tax efficiencies.
Final Thoughts
Taking the time to review your finances and tax strategy early in the year can save you time, money, and stress as you move through 2025. By staying organised, claiming all the deductions you're entitled to, and planning ahead for tax payments, you can ensure your business is on the right track for the year ahead.
If you’re unsure about any of these steps or need help with your tax planning, working with an accountant can provide peace of mind and help you avoid any pitfalls. Get in touch with us today by emailing gary.summons@perkaccounting.co.uk.