If your self-employment comes to an end, either naturally or through the decision to incorporate, it pays to be careful as to the date on which you choose to cease trading as this can have a major bearing on the amount of tax payable in the final year.
Example:
If William chooses to cease on 31 March several years later, as his profits have grown and he is incorporating, then he will be taxed on 23 months’ profit in one year with very little in the way of overlap relief.
If, however, he ceases on 1 May in the tax year he will be taxed on the final 12 months of profit only.
This shows that timing the cessation date correctly can save considerable tax.
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