Year end tax planning for directors and employees
Income over £150,000 is taxed at 50% (42.5% on dividends). You might be able to avoid this additional rate next year by bringing forward a bonus or dividend into 2011/12, or avoid it this year by delaying such income until 2012/13.
You can use a similar strategy to keep your income below the level at which you would lose your personal allowance.
If you are going to work abroad for over a year, you should try to leave the UK before 6 April 2012. You need to be away for a whole tax year for the income from working abroad to be free of UK tax.
If you hold share options, you should look at the tax as well as the investment issues in deciding when to exercise them. This is also a good time to review whether a company car is worthwhile having, as the tax on most cars will increase in 2012/13 and again in 2013/14. Switching to a company car with very low CO2 emissions, or a tax-free electric car, will save you and your company tax and national insurance contributions (NICs), as well as reducing other costs.
If your business is affected by the personal service company rules (IR35), it is important to calculate how much salary to draw before 6 April 2012 to avoid being taxed on a ‘deemed payment’.
Finally, if you are both employed and self-employed, you may be paying excess NICs. You can defer some NICs, but you should normally apply by 5 April 2012 for deferment in 2012/13. HMRC will also accept an application for 2011/12 if it is received by 5 April 2012.