We all know the feeling of dread when you see your payslip and notice just how much of your gross pay disappears before it reaches your account. Paying a high amount in tax can feel frustrating!
Although a necessary and universal thing, we understand that many people want to understand how they can possibly decrease the amount of money leaving their account.
We have some tips for you – keep reading to find out how you could pay less tax.
Pay Family Members
If your children (old enough to have an NI number), spouse or partner assist you with your business, you can potentially pay them a wage which will reduce your taxable profits. If they are not involved in the business, you could still give them shares so that they can take advantage of the tax-free dividend amount each year.
Set Up As A Limited Company
Think to yourself, do you have the appropriate legal structure for your business? You could consider setting up a limited company if you are a sole trader or a partnership that pays higher rate taxes.
Pay Yourself Smartly
If you are a limited company director, ensure you are using the most tax efficient methods of extracting money from your business. Consider a combination of salary and dividends to avoid paying PAYE and employee NI.
When you run a limited company, you have control over how you pay yourself. Instead of taking all your income as a regular salary (like an employee), you can use a combination of salary and dividends to save on taxes.
By keeping your salary low (just enough to meet legal requirements or qualify for state benefits like a pension) and taking most of your income as dividends, you reduce the amount of tax and National Insurance you pay overall.
Loaning Between Companies
Did you know you can loan money to another entity via an intercompany loan and then use the money for another business venture or investing in property? Also, did you know dividends between companies are tax free?
Working From Home
If you use your home for business purposes, you can claim a tax deduction for this.
Get Tax Relief From Your Pension Scheme
If you contribute to a registered pension scheme, you can get tax relief on your contributions. This can be corporation tax relief if contributions are made by your own limited company, or personal tax relief on pension contributions if you’re a sole trader or individual who needs a tax return.
Update Your Will
Update your will to minimise the inheritance tax consequences of your death. You could investigate relevant life and critical illness cover, ensuring your loved ones are taken care of should the worst happen.
Register For VAT
Ensure you register for VAT on time to avoid costly penalties. The compulsory registration threshold is £90,000 of turnover in any rolling twelve months. You can reclaim the VAT for certain items purchased or services received before you registered.
Investigate The Benefit Of Schemes
If you have already registered for VAT, schemes such as the flat rate scheme and cash accounting can save you money and improve your cash flow.
Meet Accounting Deadlines!
Ensure you complete all tax and VAT returns on time to avoid fines and interest!
Consider Your Car
Consider whether any cars used by your limited company are owned personally or by the business. There can be advantages and disadvantages to both.
Identify Benefits That Can Be Tax Free
The following benefits paid on behalf of your staff can be tax free:
- Provision of workplace nursery
- Lunch vouchers
- Green transport
- Some relocation expenses
- Cars used for carpooling
- Mobile phones
- £50 trivial benefits
Loaning Your Company Money
If you loan your business money you can charge the company interest on this and make the most of the savings allowance! This must be at a commercial rate. You do need to tell HMRC about the interest payment you receive.
Time Your Purchasing
Depending on your year end, there are better and worse times to purchase assets or make investments through your company in terms of when you will get the tax relief.
Contact Bells Accountants
Make The Most Of Your Accountant!
- Utilise free consultations
- Find an accountant you can talk to
- Easily change accountants if necessary
- Prepare for meetings
- Organise your paperwork
- Brief properly on questions and ask for further explanation if necessary
- Never be afraid to ask and keep talking to us
- Ask us to introduce you to other recommended advisors or clients who may be good customers for you!
Rely On Bells Accountants
As a trusted accountancy firm in our area, we’re confident in the work we can provide to your business. Whether you’re wondering how to pay less tax or need some tips about how to budget your business, our experts are eager to chat and advise you. Email to start the process.
