Saturday, August 20, 2022
UncategorizedPaying your Due – How to Maintain a Growing or Diversified Business

Paying your Due – How to Maintain a Growing or Diversified Business

Collaborative Post

While Christmas may be barely one month away, it’s fair to say that young businesses in the UK are not being gripped by festive cheer.

In fact, the percentage of startups and SMEs predicting growth has fallen to its lowest level in two years, having tumbled from a healthy 54% to just 40% this month. The uncertainty surrounding Brexit is at the heart of this issue, of course, but the lack of positive sentiment is arguably placing an even greater strain on the economy.

There are some businesses loColoking to grow in the UK, however, or at least diversify and penetrate new markets. This brings considerations of its own, such as how to cope with sudden infrastructure changes and any new tax liabilities that may be due. We’ll consider this below, while asking what steps you can take to expand your business in a manageable and compliant way.

 

  1. Consult with a Tax and Accountancy Specialist

Let’s start with the basics, as you should not attempt to grow or diversify your business without first consulting a tax and accountancy specialist.

Take service providers like RSM, for example, which can provide actionable tax advice

depending on your precise circumstances. If you wanted to expand your domestic venture overseas, for example, they could help to explain any additional tax liabilities that are associated with specific markets and jurisdictions.

They’ll also explain how your proposed changes will impact on your bottom line tax rate, while helping you to implement the necessary changes in your company structure.

The main benefit of seeking out expert advice is that it can be tailored to suit your company’s unique needs, driving greater efficiency and profitability whatever you have planned.

By Dave Dugdale from Superior, USA
  1. Juggle your Income Based on Revenues

If you’ve planned for growth, you may well find that the business is forecasting higher revenues and salaries for the following year.

While this is inherently good news, it could also create an increase that pushes your business into the 35% tax bracket. This will have a direct impact on profitability, so you may want to absorb as much income as possible in the current tax year.

With this type of approach, you can book as much income as possible at the lower tax rate of 25%, optimising your margins and creating a financial safety net ahead of the new year.

With this in mind, be sure to invoice early and adopt 30-day repayment terms wherever possible, while also being proactive when booking and chasing payments.

 

  1. Defer Income if you’re Diversifying

In instances where you’re diversifying your business, you may be a little unsure as to what the next year will bring.

After all, diversification may take a little longer to deliver returns, particularly if your tapping into new markets or developing revenue streams from scratch.

To negate this issue, consider deferring income in instances where you’re enjoying a successful and lucrative year. Even checks collected during the current financial year can be banked in the next, as tax is only applied in the time period that they’re deposited.

 

This way, you can build a financial security net to help support your diversification plans, helping to absorb any take changes or increases that may come your way as a result.

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