What Does a Tax Advisor Do for a Small Business?
A tax advisor helps individuals and businesses understand their tax responsibilities, plan ahead and make informed financial decisions. Good tax advice is not about avoiding tax or finding artificial loopholes. It is about applying the available rules, allowances and reliefs correctly while remaining compliant with HMRC.
Tax compliance and tax planning
Tax compliance looks backwards. It includes preparing accounts, calculating taxable profits, completing returns and meeting filing deadlines.
Tax planning looks forward. Decisions often need to be made before the end of a tax or accounting year. Once the year has finished, some opportunities may no longer be available.
A tax advisor may help you:
- Estimate future tax liabilities
- Review business profits during the year
- Plan the timing of major purchases
- Understand available allowances and reliefs
- Decide how to take income from a company
- Prepare for changes to tax rules
- Avoid unexpected bills and penalties
Regular management accounts can support this process by providing up-to-date information about profitability, cash flow and expected tax.
Tax advice for limited companies
For a limited company, tax planning may cover Corporation Tax, directors’ salaries, dividends, pension contributions and business expenses.
Directors also need to understand the effect of taking money from the company outside salary or dividends. An overdrawn director’s loan account can create additional company and personal tax consequences.
Capital expenditure is another important area. Equipment, machinery and certain vehicles are not always deducted from profit in the same way as everyday expenses. Instead, the company may claim capital allowances subject to the relevant conditions.
Advice for individuals and sole traders
A tax advisor can also help sole traders, landlords and individuals with Self Assessment, allowable expenses, payments on account and future tax planning.
The best approach depends on your complete circumstances. For example, making a pension contribution or purchasing equipment may reduce a tax liability, but the decision must also make commercial and financial sense.
When should you seek advice?
Tax advice is particularly valuable when starting or changing a business, buying a major asset, taking on employees, approaching the VAT threshold or expecting profits to change significantly.
Seeking advice before completing a transaction usually provides more options than asking after it has happened.
GMS Accountants provides straightforward tax and accounting support to businesses and individuals across Cambridge and Nottingham. If you would like to discuss your position and plan ahead, please get in touch.
This article provides general information only. Tax treatment depends on individual circumstances and rules may change.
