Tax saving tactics

Roger Gunning FCMA CGMA

With the November budget looming and the Chancellor looking to raid businesses to pay for the Covid-19 business support and furlough schemes there has never been a better time to tax plan and try and save as much tax as you can.   It’s going to get tough for small businesses so we have put together another checklist of tax saving tactics for small businesses.    If you need help with your business visit our website and request a call back, email us or call us.   We can offer a free consultation with no obligation.

  1. Very importantly take money out of the business in a combination of dividends and salary.   Make sure your accountant calculates the most tax efficient way to do it.   If you are married pay your spouse a salary that reflects the work that he/she does for the business. Remember the tax free dividend applies to all directors.
  2. Consider making Pension contributions.  It is one of the most tax efficient saving schemes about and there are a number of options available to you.   Pension schemes are ways for you to save money for retirement.  Self-Invested Pension Plans are gaining more popularity as you decide how much, when and where you invest.   Make sure you consult a Pension Advisor. Also, keep up your NI contributions to build up your state pension entitlement.
  3. Depending on whether you are a limited company or partnership consider making key employees directors or partners.   This can reduce your NI bill and increase key employee loyalty.
  4. Running your car through the business can be a benefit or liability depending on the vehicle. There are benefits in leasing or buying electric cars through the business as this is very tax efficient.    Also, pick-up trucks are tax efficient.   For other vehicles you will need to get your accountant to run the numbers on whether you lease or buy the vehicle through the business or buy your own vehicle privately and charge the company business mileage.
  5. Consider the best status for your business.   Your accountant should be able to help you with this decision by doing the sums.  You have three options:
    • Limited Company
    • Partnership
    • Sole Trader
  6. If you are thinking of selling your business make sure you tax plan and make sure your accountant gives you sound advice on how best to plan for this.   You’ve worked hard so you deserve to retain as much profit as possible.
  7. VAT flat rate scheme.   If your net sales are less than £150,000 consider switching to the flat rate VAT accounting scheme.   There are rules and it is not always beneficial but the administration is much easier and again get your accountant to advise you on this.    Under the flat rate scheme you do not need to calculate the VAT liability from invoices received and issued. Instead you pay VAT as a flat rate percentage of sales. You may pay less VAT but make sure your accountant does the sums for you.
  8. Maximise your capital allowances especially if you own the business property.   We are sometimes surprised to find that owners of business properties have not maxed out on the capital allowances that can be claimed.   
  9. Research & Development (R&D).    You may be entitled to R&D tax credits.   We work with one of the leading R&D specialists who will review and calculate your entitlement to tax credits and prepare the R&D forms for submission.
  10. Employees on low wages.  You should note the following and research whether any of your employees have eligibility.  The HMRC website provides up to date information on this.  And remember as an Employer you must pay the minimum wage and take care of your employees as best you can by ensuring they all receive their full entitlements.
    • Working tax credits
    • Child tax credits.
    • Universal credit.
    • Childcare vouchers. 
  11. You can generally employ any of your children aged 13 or more and pay them a salary which is deductible from your own business income. How Much Can You Pay? A salary paid to a child must be justified by the amount of work which they actually do in your business. So for example if your child works 1 hour a day you can only them a salary commensurate with that amount of work.
  12. Finally make the best of all tax free employee benefits:
    • Providing company bicycles.    Or pay employees up to 20p a mile when they use their personal bicycles for business.
    • You are allowed to give one mobile phone to each employee.
    • Transport subsidies.
    • Proving health club membership.
    • Workplace crèches.
    • Allowance of £150/year for staff parties

If you need more information on how to save money visit our website.   Give us a call for a free consultation.