Tax planning checklist for partners of law firms
It’s crucial to stay up to date with your personal tax position, but when you’re running a busy legal practice it’s hard to keep on top of everything. Our eleven top tax tips provide a handy checklist of all the things every partner should know and be thinking about. To download a copy of the full checklist, click here...
1. Auto-enrolment – are you ready?
No matter how few people you employ it will cost, so bear it in mind when you considering salary increases. Need some help with the necessary changes to payroll, or the whole auto-enrolment process? Contact our experts today.
2. LLP rules have changed
HMRC have introduced three tests and you must pass one of them or you’ll be treated an employee for tax purposes. Do you pass the partner test?
3. Thinking of Incorporating?
You might want to think again! It is no longer possible to claim entrepreneurs’ relief on transfers of goodwill to a company and a company can no longer claim tax relief on the write down of goodwill.
4. Remember to use up your unused pension allowances
Annual contribution limits are now reduced to £40,000 gross, but you may not know that you can benefit from unused allowances from the previous three years. In some circumstances it is possible to get £750 of value into your pension for £150!In the Summer Budget the Chancellor changed the rules for top rate tax payers from April 2016, so be careful! If you made pension contributions prior in this tax year prior to the Budget you may get another £40,000 allowance. Take advice.
5. Protect your pension pot
Don’t forget about the lifetime limit if you have a substantial pension pot. If your fund is worth £1m or could grow to £1m over the remainder of your working life is it time to protect it?
6. Help your cashflow
Consider cash accounting for VAT if your turnover is below £1.35m. It will help your cashflow.
7. Claim your employment allowance
Are you claiming your £2,000 employment allowance? If not you should be. This amount increases to £3,000 in April 2016. Also consider employing under 21 year olds to benefit from their NIC exemption.
8. Get tax relief on borrowings
Tax relief is available on qualifying business loans. Make sure your borrowings are structured to benefit from the tax relief available.
9. Plan ahead for Capital Gains Tax
You may not be thinking of selling your interest in the partnership just yet but think ahead. Keeping a record of base costs for your investment in the business and supporting evidence will help when you do sell up.
10. Don’t lose your Entrepreneurs’ Relief
Be careful with your property. If you let a property to your business and charge rent you will lose your entrepreneurs’ relief on its sale.
11. Potential tax planning opportunity
From April 2016 there will be a 7.5% tax charge on dividends but the first £5,000 could be exempt. The details are still to be announced but there may be a tax planning opportunity. Watch this space!
These are just a few of the ways our legal sector specialists can help you to make the most of any tax saving opportunities and plan ahead. For advice on any of our top ten tips or to discuss your personal tax matters, please get in touch with Andrew Henshaw, Professional Practices Team Leader on (01243 520620) or [email protected]