Why the start of the tax year matters
The start of a new tax year is more than just a date on the calendar. For small business owners, it’s a chance to reset, review and make sure your finances are set up properly from day one.
A few simple checks in April can help you avoid common mistakes later in the year, especially when it comes to payroll, dividends, bookkeeping and planning ahead.
Getting organised early can help you:
- Spot tax-saving opportunities before they’re missed
- Avoid compliance issues with HMRC
- Start the year with clearer financial goals
- Reduce the stress of scrambling at year end
Rather than waiting until deadlines creep up, the beginning of the tax year is the ideal time to get your business in order and make sure everything is working efficiently.
Update payroll and tax codes
One of the first things to review at the start of the new tax year is your payroll setup. Even small errors here can cause problems later, especially if you have employees or pay yourself through your limited company.
- Check employee tax codes
HMRC may issue updated tax codes at the start of the tax year, so it’s important to make sure your payroll software reflects the latest information. Using the wrong code could mean employees pay too much or too little tax, which can lead to confusion and corrections later on.
It’s also worth checking:
- Tax code notices from HMRC
- Student loan deductions
- Pension contribution settings
- National Insurance thresholds
- Any statutory pay updates
- Review director salary planning
If you’re a limited company director, the new tax year is a good time to revisit how much salary you take from the business. Many directors use a low salary plus dividends approach, but the “right” salary level can vary depending on:
- Whether you have other income
- National Insurance thresholds
- State pension qualifying years
- Corporation tax and personal tax considerations
- Eligibility for Employment Allowance (if applicable)
A quick review now can help make sure your salary is still aligned with the most tax-efficient strategy for the year ahead.
Review your dividend strategy
If you run a limited company, dividends are often a key part of how you take income from the business. But they should never be set on autopilot.
- Think about salary vs dividends
A tax-efficient remuneration strategy usually involves balancing salary and dividends rather than relying too heavily on one or the other. At the start of the tax year, it’s worth asking:
- Is your current mix still tax efficient?
- Are you likely to move into a higher tax band this year?
- Do you expect profits to increase or fluctuate?
- Are there enough retained profits to support dividend payments?
Dividends can be tax efficient, but they must be declared correctly and supported by available profits.
- Focus on tax efficiency
Dividend planning isn’t just about what you can take out of the business, it’s about what makes sense from a wider tax perspective. Reviewing your strategy early can help you:
- Use available allowances more effectively
- Avoid unnecessary higher-rate tax
- Plan distributions around cashflow
- Keep accurate dividend paperwork in place
- Coordinate income with your personal tax position
A little planning at the start of the year can make a big difference by the end of it.
Check your bookkeeping systems
A new tax year is the perfect time to ask a simple question: is your bookkeeping system helping your business, or holding it back? If your records are messy, inconsistent or always behind, now is the time to fix it before the year gathers pace.
- Review your cloud accounting setup
If you’re using cloud accounting software, make sure it’s fully up to date and working properly for your business.
Check whether:
- Your bank feeds are connected correctly
- Your chart of accounts still makes sense
- Sales and purchase invoices are being recorded consistently
- Receipt capture tools are being used properly
- VAT settings are correct
- Reports are giving you useful, accurate information
If you’re still relying on spreadsheets or manual processes, this could be a good time to move to a more efficient cloud-based system.
- Improve your record keeping habits
Good record keeping makes everything easier, from cashflow management to tax returns.
Start the new tax year with better habits such as:
- Uploading receipts as you go
- Reconciling bank accounts regularly
- Keeping business and personal spending separate
- Recording expenses in real time
- Setting a weekly bookkeeping routine
The earlier you stay on top of your records, the less likely you are to face a panic before VAT returns, year-end accounts or self-assessment deadlines.
Review business goals for the year
The start of the tax year is also a great opportunity to step back and look at the bigger picture. Too often, small business owners spend so much time dealing with day-to-day admin that they don’t stop to think about where the business is heading.
- Set or refresh your budget
A realistic budget can help you make better decisions throughout the year. Review:
- Expected sales or turnover
- Fixed monthly costs
- Seasonal spending patterns
- Staffing or subcontractor costs
- Planned investments in equipment or software
- Tax liabilities that need to be set aside
A budget doesn’t need to be complicated; it just needs to give you a clearer picture of what’s coming in and what’s going out.
- Use forecasting to stay ahead
Forecasting helps you spot issues before they become problems. Even a basic 6-to-12-month forecast can help you:
- Anticipate cashflow dips
- Plan for tax payments
- Decide when you can afford to invest
- Understand hiring capacity
- Avoid taking too much out of the business too soon
When your financial data is up to date, forecasting becomes far more useful and much less stressful.
When to speak to your accountant
Many business owners only speak to their accountant when something is due. But the start of the tax year is one of the best times to have a conversation. A proactive review in April can help you make smarter decisions before the year gets busy.
It’s worth speaking to your accountant if you want to:
- Check your payroll is set up correctly
- Review director salary and dividend planning
- Improve your bookkeeping systems
- Understand your tax obligations for the year ahead
- Set budgets and cashflow forecasts
- Plan for growth, investment or hiring
The earlier you review things, the more options you usually have.
Final thoughts
A new tax year is a fresh opportunity to get organised, improve efficiency and make sure your business is set up for a stronger year ahead. By reviewing payroll, dividends, bookkeeping and your financial goals early, you can reduce stress, avoid mistakes and make more confident decisions throughout the year.
If you’d like help reviewing your small business finances at the start of the new tax year give us a call on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.
