Company directors

Bringing forward income could be a sensible approach if your income has taken a hit this year, but you expect it to return to normal next year. 

• If your income is less than £150,000 this year but is expected to exceed that figure next year, you could bring forward income into 2022/23 to avoid the additional or top rate next year. 

• Conversely, if your income will fall below £150,000 in 2022/23, you might be able to avoid the additional or top rate of income tax this year by delaying a bonus until after 6 April 2023. 

• Alternatively, you could consider a similar strategy to keep your income below the level at which you would lose your personal allowance. This option would mean sacrificing salary to bring your income below any of the thresholds in exchange for a tax-free employer’s pension contribution.

Dividends 

You should consider paying a dividend before 6 April 2023 if you are the owner of a limited company, particularly if you have not already made full use of the £2,000 tax-free allowance. 

Bringing forward a dividend payment could also help if the income falls into the basic rate band this year (or Scottish starter, basic or intermediate rate bands), or if you expect to pay tax at the additional or top rate next year but only at the higher rates this year.

You could even give shares to your spouse or civil partner shortly before paying a dividend – provided you genuinely transfer ownership. It is advisable to leave as much time as possible between the gift and the subsequent dividend payment.

Planning points

•          If you are going to work abroad for more than a year, there are complex rules around residency, so you should seek specific advice. 

•          This is a good time to review your company car situation, especially if you are now working from home and expect that to continue long term. If you are hardly using your company car, you can return it to your employer to remove the tax charge. 

The changes introduced from 6 April 2020 mean that switching to a fully electric car or an ultra-low emission hybrid with a high electric motoring range will drastically lower your tax cost. The switch will also save tax and NIC for your company. 

•          If your business is affected by the personal service company rules (IR35), you will need to plan for the off payroll working rules that will apply to IR35 engagements from 2021/22 onwards – postponed for a year due to the Covid-19 crisis. If you employ contractors, or if you are contractor yourself, we can help you to understand the impact of IR35 and advise you on your options to ensure you remain within the new rules.