Contractors, here’s your limited company’s financial plan for 2024
As we leave 2023 in our tracks and prepare for Spring Budget 2024 on March 6th and the dawn of a new financial year on April 6th, I’m making a concerted effort to shrug off the ‘January Blues’ and get freshly motivated.
Take stock, at home and in business
To this end, one of the initial tasks is to take stock of the company, look at how the previous year went and set some objectives for the year ahead. Some of those objectives will include general goals and personal ambitions, but perhaps more importantly it’s an opportunity to review how the business could have been more efficient. How it could have been better.
Contractors, for the good of your business’s bottom line and your take-home pay, I urge you to do the same, as the basis of a 2024 financial plan for your limited company, writes Angela James of Yolo Wealth.
The new year is also a great time as a PSC contractor, or an umbrella contractor, to consider your allowances and personal finances. If you’re a PSC, that should extend to how your business could be better structured to help you achieve your goals, and likewise look at your incomings and outgoings if you’re an umbrella contractor. There’s just a couple of months until 2023/24 ends on April 5th, and 2024/25 begins.
Review your budgeting, costs, and cashflow
Whether this is applicable to you personally or your company, or both, by giving yourself even just half an hour to sit and look at your finances and budgets, you could save a small but still significant chunk of money.
- Are you paying for services you don’t need?
- Do you have unnecessary subscriptions?
- Could you make some changes to get a better offering or lower payment?
- Is an item of expenditure actually an allowable business expense?
- Have you taken the right amount of dividends, considering the tax-free allowance is soon halving to just £500?
Review your savings (if you’re fortunate enough to have savings), or any monies held back for an emergency. Are these in the right account? Are you getting the best rates; are they held tax efficiently? This is an important review to run, because now that rates have increased you are more likely to need to pay a little tax on your interest.
Do you have a surplus? If so, are you using this in the best ways to meet your longer-term plans? Are you getting the best returns; have you used all your allowances personally, or for the business? When you go abroad shortly, will you be using an account that doesn’t put a percentage on every transaction and/or cash withdrawal?
Do you or your business need some financial planning?
Have you considered your personal or business risks, so do you need a health check or an actual financial plan? A blueprint to follow?
Have you considered your opportunities to protect yourself as the main earner or director? What would your situation be if you had a health issue? Are your retained funds for contingencies or tax in the best place? Perhaps you could you get some interest on these holdings or do something better with them?
Also, is your business structured in the right way, or are there any tax planning opportunities you could exploit if you tweaked the structure?
Now, I’d like to address the more ‘experienced’ contractors. Are you content financially with your warchest as you approach the last few years of your business career? Is it time to think about an exit strategy? Or, how do you to plan to wind down the business in the future? Have you got a fully mapped out retirement plan? Do you know when, exactly, you’ll retire and how much you would have on that specific date? How long would those savings last, at the current and projected rates of inflation, and as the cost-of-living crisis persists?
What ambitions do you have for the coming year?
Thinking about your goals will help you to determine a financial plan for 2024. Whether you’d like to grow your business, expand your skillset or invest so you can have more capacity; when is the best time to make your move?
Are there financial goals you want to address in the coming year, a new home, a holiday, or have you considered your future retirement? If HMRC comes calling, do you have a fund or policy to cover you?
Personal financial goals and the tax year
As we move into the first quarter of 2024, self-assessments are due; tax is due.
As the financial year end looms, January is the best time to get help and advice on your financial position.
Acting this month, will give you a sufficient amount of time to make arrangements to take advantage of any of your tax allowances before the tax year ends.
Top financial considerations for 2024
Have you considered:
- Personal income allowance
- Your spouse/partner’s personal income allowance
- Dividend allowance
- Pension allowance (including the last three years, notably any pensions carry forward that may be available or lost in the new year if not used – so, like all the allowances listed in this section, it’s a case of ‘use it’ before April 6th or 'lose it.’)
- ISA allowance
- Savings allowance
- Capital Gains Tax allowance
- Inheritance Tax and Gift allowances
Your home is like your business; and like my marathon attempt!
Most of us will run a household budget of some description. If you run a business, you will likely have a plan for your business albeit these things can be loose and ever evolving.
The most efficient way to run your finances and make the most of them is to have a financial plan of some description. I liken to this to when I am running, or planning on running an event, whether it be a nice 10k race or even the one and only marathon I ran a couple of years ago! I created a training plan; it wasn’t always possible to stick to it religiously, but I closely followed it and I succeeded in finishing it.
I won’t tell you my time -- as that part didn’t go to plan! But my point is, and my bottom line was, I could have NEVER done it without a plan. With running and running a company, it really is a case of ‘Failing to plan is planning to fail.’ It’s so important to have a financial plan, something you can work with and adapt as your circumstances evolve and change.
Finally, how and where will you spend, save and succeed in 2024?
So if you commit nothing else to writing at this time of year, make it a financial plan for the year; put some tangible goals involving saving, spending and success on paper. With your plan in place, a financial adviser can help – I know, because I am one! Alternatively, a good adviser can assess your company and personal income and create a plan on your behalf. Put us to work so we can help you find the solutions to make your financial plan for 2024 a reality.