Why should you do tax planning?
Since the beginning of 2020, the world is battling the pandemic on various fronts. The impact of the COVID-19 wave is not limited to just adverse health issues. Nations around the globe are witnessing undesirable economic repercussions. The government authorities are under tremendous pressure to bring the economic scenario of their country on track.
Tax planning is a critical part of most entities. However, in the present situation, you need to realise tax planning’s relevance to ensure seamless business operations manifolds. Whether you are an individual taxpayer or own a corporate entity, planning for your tax needs is imperative. Most governments are injecting the economy with restoration schemes. In the UK, the government has already come up with a series of relief packages and plans to aid the troubled British citizens. Apart from the pandemic, the implementation of Brexit is also putting pressure on the economy. For the time being, the revival measures may help but, the issues are more deep-rooted than we can see. Businesses need to remain ready for unforeseen unfavorable situations.
A plethora of problems persist for the Brits
One of the most significant arenas for providing relief during Corona-induced trouble is taxation. However, reduced tax rates and postponements in payments cannot prolong for a long time. There is a massive drain in the UK government’s exchequer due to the innumerable revival measures put into effect. Hence, the continuation of the prevailing relaxations and assistance policies shall prove quite arduous soon.
The fact of a surmounting deficit in the government’s budget is known to all. In the UK, there is a budget deficit of over £2 trillion.
“Due to the Coronavirus pandemic, the United Kingdom has witnessed the biggest budget deficit in a year after the era of World War II."
Massive debts are another point of concern for the British economy. Keeping the profound deficit under check and repaying the piling amount of debt is a challenge for policymakers. The government, sooner than later, will look into avenues to generate revenue. Many expert economists have outlined the possibility of a tax rise for the government’s treasury’s sustenance in the upcoming months. Income tax and VAT are among the primary sources of income for the government.
Tax professionals have outlined the likelihood of increased capital gain taxes, basic income tax rates, national insurance rates, and inheritance tax rates. Diverse tax entities, small or large, need to understand the value of tax planning. Most business concerns are already facing various issues due to COVID-19; they must prevent aggravating their problems. Tax planning is one of the crucial elements of the process of being prepared for the next hurdles.
A brief on Tax Planning
Tax planning is a legitimate method for different entities to optimise their tax obligations. It involves making the most out of the deductions, exemptions, and rebates available to your entity as per regulations. Drafting proper tax planning strategies helps lower the business outflow and boosts the profitability position of your concern.
Integral aspects of Tax Planning for different entities in the coming times
Looking at the existing and impending scenarios, all taxpayers in the UK must consider certain fundamental tax planning aspects. Let us enlighten ourselves about some of these aspects.
- VAT changes
During the corona pandemic, the government did launch measures to lower VAT rates for entities in sectors such as food and hospitality. However, many anticipate that these relaxations will last for a short time. The state may raise the VAT rates for some industries to regain the lost earnings in the past months. Entities must analyse the probability of such VAT rise and its impact on their business to devise a better plan. VAT-registered business concerns must also plan for the VAT compliance demands.
- Bracing for a surge in income tax in the coming future
An increase in the amount of income tax is one of the many possibilities that tax entities must consider. Taxpayers falling in the bracket of higher income tax rates need to look into this matter particularly. Most tax veterans do not expect a large increase in the income tax rate. Yet, a moderate rise is highly probable. The HMRC may even remove the prevailing threshold applicable to higher tax rates.
While undertaking tax planning, you should also look for an expected rise in the capital gain tax rates. The UK government may raise the capital gain taxes in line with the higher income tax rates. Entities looking to inherit assets shortly should also evaluate the chances of a rise in the inheritance taxes.
- Saving considerable amount with timely compliances
All tax entities must give due consideration to the diverse tax filing compliances and deadlines. During the last months, the tax filing and expected payment dates have witnessed amendments multiple times. Entities must ensure that they meet all tax filing requirements effectively to prevent penalties and late fees. Prepare and file all tax returns and forms as per the stated time limits. Tax planners must consider compliances related to PAYE, VAT, National Insurance, and other applicable tax laws.
- Duly estimating the losses caused due to the Corona Crisis
Incurring losses is an unfavorable position for all of us. However, they do help in lowering our tax dues. Several concerns have witnessed a large decrease in trading profits in 2020 due to lockdowns and similar norms with the pandemic. Such entities must appropriately estimate their losses to enable business firms to lessen their tax burdens. They must also look into duly carrying forward the losses to minimize their tax liabilities in the coming future.
- Assessing the eligibility for different assistance measures from the government
Over the past months, the chancellor has come up with innumerable announcements to provide the suffering taxpayers’ necessary benefits. It would help if you checkout out the myriad assistance schemes and programs to leverage the advantage of lower tax liabilities and compliances, wherever applicable. Take the help of tax professionals and consultants to understand the applicability of different tax relief plans brought forth for your entity. Maximising the benefits from assistance schemes and allowances from the HMRC can surely help you go a long way.
Time to take action against the erratic times with some robust Tax Planning Strategies!
Undeniably, the imminent times can create further issues for your business entity. However, one can lower the impact of the uncertainty with proper tax planning. Both personal and corporate taxpayers must initiate adequate tax planning. Entities should determine their future status of operations to forecast expected earnings. They can consult tax professionals such as tax outsourcing companies to get a better insight into the tax planning needs. Start now!
Seek out remarkable assistance for your tax planning needs with Initor Global’s Tax Outsourcing Services!
Tax planning can be a complicated process for many business owners without the assistance of tax experts. Many accounting firms and CAs in the UK are also facing the challenge of managing their clients’ tax needs. Are you among such firms looking for reliable taxation outsourcing companies for your tax planning requisites? Initor Global can provide the helping hand you need. We have a highly qualified team for handling your tax compliances. Our tax pundits will help you in crafting useful tax planning strategies. Contact now!
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