Peter Harrup of PKF

THE run-up to April 5 is traditionally the time when individuals focus on financial and tax planning. Company owners often have more options than most and should make the most of them in these tough times.

To send a link to this page to a friend, simply enter their email address below.

The message will include the name and email address you gave us when you signed up.

Email address

  Send link

To send a link to this page to a friend, you must be logged in.

The ability to control your income flow is particularly useful. For example, depending on your level of income in 2011/12 and expected income in 2012/13, it may be beneficial to advance or defer your taxable income to ensure that you use up the 40% Income Tax band in both years. Equally, it may be appropriate to defer or advance income so that your total income remains below £100,000 in both years so that your personal allowances are not affected.

It is often possible to declare a dividend at the right time to trigger a smaller tax liability or defer a dividend altogether. Where deferral is not suitable for all shareholders in a family company, waiving your right to a dividend will reduce your income (but you will lose it for good).

Alternatively, if you need the cash but do not want to exceed a particular tax threshold, taking an interest free loan from the company instead can be tax-efficient.

However, it is usually best to repay the loan by way of a dividend within nine months of the year-end, otherwise there will be a (refundable) tax charge in the company and there will also be a small tax charge on the benefit in kind of loans exceeding £5,000.

If your spouse or civil partner does not own shares in your company, there is still scope to gift shares to them so that dividends paid can use up his or her personal allowances and basic rate band. However, take expert advice on making the gift to ensure that all the requirements are met and that dividends will be taxed as you intend.

Making pension contributions from the company is the most tax-efficient way to extract your profits for the long term: the company gets Corporation Tax relief, no NIC is payable and no Income Tax is paid until retirement. The annual contribution limit for an individual (the total of personal and employer contributions) is the lower of 100% of net relevant earnings or £50,000. If you wish to make higher payments, unused allowances for 2008/09, 2009/10 and 2010/11 may be available for carry forward into 2011/12 (up to £150,000 in total).

Finally, consider how to maximise your use of capital allowances. It may be beneficial to advance any intended purchases if the full £100,000 annual investment allowance for 2011/12 has not yet been used; the allowance falls to £25,000 from April 2012.

There are many other options to consider and it is sensible to take a cold hard look at what you really want to achieve and then take expert advice to make sure you do.