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  • Writer's pictureSamantha Hind

Effective Tax Planning, what does it actually mean?

Updated: Sep 13, 2023

First things first, what do we mean by Tax Planning?


In simple terms, tax planning does what it says on the tin. It is planning for the payment of your taxes, whether that be tax due soon or tax due in the future due to an event.

Tax planning can be considered as making sure you have enough money to pay your taxes in full when due. Which is essential or otherwise penalties and interest will rack up and this isn’t advised!

Taking it a level up, effective tax planning are “ways” or “strategies” which taxpayers adopt to reduce their tax liabilities now or in the future within the letter of the law and HMRC’s rules.

This could range from receiving a £50 voucher as a trivial benefit as a way to reduce the corporation tax bill of the company and increase your post-tax income as a business owner, to applying for capital gains tax reliefs on the sale of an asset.

From experience, client tax planning discussions usually take place in 1) an annual meeting or 2) when a client informs you of something they want to or have already done.

Annual Meetings 📆

Usually known as year-end reviews for your corporate clients and tax year reviews for your individual clients.

You are likely to have your own processes for how and when you carry out these reviews.

A year-end review is typically completed 1-3 months before the end of the accounting period for each of your clients. You probably have a checklist you discuss with your client to make sure they have considered ways to reduce their profits subject to corporation tax. This ranges from discussing making pension contributions for directors to charitable donations.

A tax year review is typically carried out for an individual client 1-2 months before 5th April. Once again, it is looking at ways to reduce the income tax bill for the individual.

With March, September and December being very popular year-ends and January being the tax return filing deadline and April is the end of the tax year, the September to April period can be a very busy one. In the industry, we call it the “busy season”.

Client conversations 👥

You have all been there and got the t-shirt. Your client comes to you and says they are selling an asset next week but aren’t sure how much it will cost them in tax and expect you to wave your magic wand to reduce their tax bill.

The good clients will come to you before the event takes place. They’ll ask you to provide support and plan the event with them to make sure it is as efficient as possible. Those clients we love!

Fail to plan = plan to fail

Is this enough? Are you really going beyond for your client? Are you capturing everything in that review or even have the time to do the review justice? How do you know you have considered all tax opportunities?

In all honesty, tax should be a regular topic on your agenda with clients rather than a one a year conversation. That for us is going beyond!

Effective tax planning is all about being proactive. You need to be ahead of the curve, planning for the future and the client’s tax position not dealing with it with a hard deadline coming up like the year-end or when the event has happened, or tax bill needs to be paid.

Depending on the client plans and the tax involved, you are likely to find that tax planning takes longer than the window you have before the end of the tax year or year-end. Your client could be missing out on valuable tax relief and deductions because you run out of time.

Supercharge your Tax Reviews

Consider monthly check ins about tax as part of month-end work for your client. If you are discussing the accounts, why not have tax as part of your agenda?

You could ensure that tax is a subject that is included in your email and newsletter communications with clients to prompt tax topics with them.

I’d recommend that that you carry out a discovery session to get to know your client in more detail even if it is a client who you have been working with for some time. What are their goals and plans? What do they care about? What do they need you to support them with? You really need to get this detail down to provide effective tax consultancy.

Then you can use this information to carry out a tax review. We call them tax diagnostics. You need to ensure that you are covering all areas of tax based on your client scenario. We typically suggest corporate clients tax reviews are focused on the client’s business lifecycle stage.

You should then review the tax opportunities identified and prioritise them based on what you know about the client. Where possible, you’d present your client with estimated tax savings to bring the opportunity to life.

After that, you should meet with your client to discuss your findings and agree your priorities. Actions are set for each party.

This process doesn’t need to be done 1-3 months before the end of the tax year or year-end. Why not create a calendar for your clients and spreads the reviews out over a 6 month period and allocate reviews to your team so to spread out the workload? Avoid the busy season or at least, reduce the reviews done in that period and focus on the compliance deadlines.

You then need to follow up with your client on a monthly basis to ensure that the actions are progressed and completed. You can share progress with the client and the savings made as the year goes by.

Diagnostax is a one-stop shop for tax consultancy and advice. We can help you supercharge your tax planning approach with your clients so you can go beyond.

DTX’ers, get in contact with your Customer Success manager for support delivering a Tax Diagnostic.

If you are interested in hearing more about DTX, please reach out to find out more!

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