New companies often experience steady growth during their first months in business, so it is important to properly assess the optimal accounting dates in order to make earnings as tax efficient as possible. Those benefitting from London Registrars’ outstanding support for new businesses can be guided through the most advantageous processes in order to secure the maximum benefit, and ensure their rapid growth and future success.
Incorporated businesses must adhere to a maximum period of twelve months for tax calculations. However, your company’s accounting period does not have to be one year exactly – you have the option of extending up to a period of 18 months, or reducing it as much as you require. Altering your accounting period can serve to extend your Corporation Tax date, which can be especially beneficial for new businesses from a tax point of view.
For example, if your business enjoys a profit of £100,000 for its first year to the end of March, but interim accounts demonstrate a profit of only £10,000 for the initial nine months, you would ultimately pay tax at the £100,000 level by the start of January.
By reducing the initial accounting period to end on December 31, your first Corporation Tax bill will be received earlier, but will be based on the lower line of profits. By shifting accounting dates from the end of March to the end of December, you would stand to pay £2000 in place of £20,000. The Company Tax will still be payable the following year, however the increased cash-flow your company will benefit from in the meantime can offer substantial benefits for your new business.
The advantages of extending or reducing your tax dates apply beyond your first year, and this is a procedure that can be done more than once. Generally, companies should extend their tax period when profits are low, and reduce it when profits are high, though there are other factors that can come into play.
It’s never too early for young companies to begin taking advantage of these tax options. London Registrars provides thorough levels of support for new business, and can provide the advice that your own recently-founded firm requires for sustained success.