I have a new client who has a 30 April year end. His s/e used to be his main income, but has run a little dry over the last few years and he now has a job, although still has the s/e business going.
With the 30 April y/e comes overlap relief of about £20k. My idea is to change the year end to 31 March. The 2011 tax return will effectively be 23 months - year to 30.4.10 and 11 months to 31.3.11.
The 23 month income of nowadays will be about £8k, giving a net loss of £12k, which will be set against employment income.
Does this sound correct?
Any thoughts or comments welcome.
Replies (4)
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Yes
Sounds like a very sensible option, all other things considered.
Just be warned - I did something similar for a client a couple of years ago. I got him a huge tax refund and he had no payments on account for the next year. Then he had a big payment in the following January (total tax for previous year plus half as much again on account). I had warned him about this but boy did he moan. "Why couldn't I have paid some of this last year" (! seriously)
There is no pleasing some people.
Might want to check
whether he is claiming, or eligible for, tax credits.
If his income is stable and within the range, not currently claiming but eligible, you might want to consider deferring the change for a year because a new claim can only be backdated by a brief interval. You will need to take into account the changing taper rates applying next year - just have to crunch the numbers.
With kind regards
Clint Westwood
taxhound
I had one like that, with clever use of available reliefs etc I got a zero tax payment one year, then boy did he moan about having a sizeable one the following year, plus of course a payment on account. I had warned him but I still ended up feeling guilty because he got a tax bill that he thought was big. The fact he had paid no tax at all the previous year, and got max tax credits, seemed to have passed him by. Blinking frustrating!