Kleinwort Benson Private Bank has set out tax advice for self employed people and owners of private limited companies as the end of the UK financial year looms on 5 April.

The UK budget, as has been announced, will be held on 24 March.

Self-employed people should consider changing their year-end accounting date, according to Scott Duncan, private client tax specialist at the bank.

He gives the example of where a sole trader has made a profit of £500,000 and where shifting the accounting date could save them a startling £37,500.

Duncan adds that any forthcoming expenses that can be delayed until after 5 April 2010 would ensure relief is given at a maximum rate of 50 per cent instead of 40 per cent if incurred before the end of the current tax year.  One example would be to postpone any staff bonuses until after 5 April 2010, he said. (At the start of the new financial year, the UK will introduce a new, higher-level income tax rate of 50 per cent on people who earn £150,000 or more a year).

As far as owners and of private limited companies are concerned, Duncan said it would be “sensible for married couples that run their business through a company, to share dividend and salary payments as evenly as possible.”  

“Payment of dividends and bonuses prior to the new income tax rate increase, which becomes effective from 6 April 2010, may”, says Duncan, “attract cash flow problems for the company.

The director or owner could therefore lend the cash back to the business. Repayments of the loan by the company to the director/owner could then be made free of any additional tax liability,” he said.

“Employers could also consider advancing salary and bonus to key staff, who could then loan the money back to their employer in return for an agreed rate of interest over the period of the loan. Alternatively, the company could provide interest free loans to staff, which could then be written off when the top rate of tax reduces.”