Tax Saving Tips for Small Businesses
There are a number of ways you can legally minimize your tax bill with some planning. Below is the list of easy tax saving tips that you can exercise for your business. These steps you can follow without paying for an accountant or tax adviser. But an expert accountant can help you easily with you tax saving if you smartly choose the adviser who knows how your industry better.
In addition to core accounting, an expert adviser knows the industry margins and other obvious costs that you might have overlooked. Because of this, you can have significant tax savings.
We have a separate article for helping you choose the right accountant, please refer to the article here.
Tax Saving Tips-Salary & Dividend Combination and Timing
HMRC taxes dividends based on the declaration or pay-out date, whichever comes earlier. For a close company with few directors, you can defer the dividend declaration date. If the total of your salary and dividend crosses the basic rate threshold. This results in significant amount of tax you would pay otherwise by exceeding the basic rate band. This is one of the basic tax saving tips you can implement and avoid paying higher rate dividend tax.
Tip 4: Capital Allowances and AIA
There are a number of qualifying fixed asset purchases which the businesses can claim as capital allowances and you might not be claiming this. For some qualifying assets, you can claim a 100% (subject to upper limit) as Annual Investment Allowance which has the same effect as claiming expenses or purchases. This can save you a lot in taxes.
Tax Saving Tips: Director Payroll Processing
If you are director of a company and not elsewhere employed, you can run a tax free salary up-to personal allowance level for yourself. This will benefit you with a straight 19% relief on the corporation tax. As the minimum tax free figure for salary income changes every year, you update your pay accordingly. For current tax threshold, click here.
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Tax Saving Tips-VAT Flat Rate Option
If you a business with not much input VAT, you might be missing thousands of pounds in your VAT by not considering the FRS scheme. Now HMRC updated FRS scheme by bringing in the concept of limited cost traders. As a result of this, the businesses that had obvious benefit from FRS like consulting firms, IT Companies etc. find FRS of no use. You can refer to our article on FRS or visit HMRC for detailed guidance , click here.