Tax is one of those topics that can either be a tool to build your business or a hurdle that holds you back.
The difference often comes down to how proactive you are in your planning.
With every Budget announcement and HMRC update, the rules change, and the opportunities evolve.
The key is to stay ahead of these changes, not just react to them.
What are the benefits of proactive tax planning?
Dealing with tax isn’t anyone’s favourite task. But if done right, it can save your business money, boost your cash flow, and even protect your business from unexpected penalties.
Plus, there is something empowering about knowing you are taking control rather than being at the mercy of the latest tax rule changes.
“Proactive tax planning is about future-proofing your business,” comments Heather Bright, Tax Partner at Moore Thompson. “Every time the tax rules change, there is a chance to adapt, rather than getting caught off guard. With the Budget coming up, now is the perfect time to put planning into action.”
So, why be proactive? Because it puts us in the driver’s seat. It allows us to:
- Minimise tax liabilities
- Optimise cash flow
- Stay compliant
- Reduce stress
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 Heather. “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 Heather. “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 Heather. “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 Heather. “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 Heather.
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 Heather.
“The earlier we take action, the more choices we have. Those choices mean more control over our tax bill and our business’s future.”
Get in touch with Moore Thompson today, and let’s discuss tax strategies ahead of the Budget for your business.