Overview of sole trader tax planning

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

Because sole traders are the most simple trading entity possible, it is very easy to overlook them when it comes to planning work. It is often the case that planning for such clients will be done on a purely reactive basis, such as when they approach an adviser to discuss incorporation or purchasing large capital items.

However, advisers should endeavour to review all of their clients’ positions at least once a year.

Planning events

Determining when to conduct planning for sole traders can be challenging. There are several annual events which may dictate when best to undertake planning work and what sort it is:

Event	Typical planning considerations
Accounting period end	Capital purchases Expenditure deductible when paid
Pension input period (PIP) end	Pension contributions (annual allowance planning)
Tax year end	Pension contributions (higher rate relief planning) Charitable donations Personal taxation considerations
Completion of accounts	Provisions Bonus accruals
Completion of tax return	Payment of accrued bonuses Claims and elections for relief
Payments on account	Reduction in payments on account

Some

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