RMD Accountancy Solutions Ltd -
Top Tax Saving Tips ...
1 ) Pensions :
Employer pension contributions are a great way to benefit employees / directors whilst reducing a company's taxable profits and subsequently the amount of corporation tax due. Pension schemes can be utilitised as a recruitment / staff retention tool or method of director renumeration.
2 ) Mileage Claims :
Any travel undertaken for business purposes can be claimed as an expense from a company, by ensuring mileage records are kept and mileage claims are within HMRC approved mileage rates no taxable benefit is incurred by the employee -
3 ) Flat Rate Expense Allowances :
Employees are entitled to a claim flat rate expense allowance, the value of which depends on the trade / occupation undertaken. Such expenses are to cover costs for specialist clothing, cleaning, tools etc... and can be claimed either via your Self Assessment Return or for employees via HMRC Form P87.
For employees a flat rate expense allowance is applied to their tax code resulting in a reduced payment of income tax.
4 ) Pay your Spouse :
Employing your spouse to work within your business is a top tax saving tip for two reasons...
Firstly wages paid are a legitimate business expense which reduces the business profits and subsequently the amount of corporation tax to be paid.
Secondly if the spouse's earnings are up to the tax threshold but don't exceed it then the employee (spouse) would not pay income tax on his/her earnings.
It must be noted that the level of renumeration must be reasonable for the work undertaken and the work undertaken needs to a justifiable contribution to the business. Care must be taken also to ensure that the employee (spouse) is not paid at an hourly rate which is below National Minimum Wage (NMW) details of current NMW rates can be found on our Facts page of this website. Your spouse should be treated the same as any other employee within your business ie : paid via the PAYE payroll, issued a P60 at the year end and given a contract of employment.
5 ) Incorporate Your Business :
Incorporating your business may lead to significant tax savings given that the highest rate of income tax is currently 50% (11/12) paid by employees, sole traders & partnerships. However the highest rate of Corporation Tax paid by incorporated businesses is only 24% (based on taxable profits of 1.5m -
Paying yourself a modest salary and taking dividend payments could result in a significant tax saving to yourself and a significant National Insurance saving to both owner/partners and the company.
6 ) Annual Investment Allowances :
With effect from the 1st April 08 (for companies) and 6th April 08 (for individuals) all expenditure on plant, machinery, long life assets and integral features up to the value of £ 100,000 (11/12), purchased on or after these dates can be offset against trading profits in full ie 100%. Also the balance of previously existing pooled assets, if below £ 1,000 can be written off too if chosen.
7 ) Incidental Overnight Expenses :
Incidental overnight expenses can be claimed for business trips which require an overnight stay. This allowance is to cover newspapers, personal phone calls and laundry whilst away. £ 5 per day whilst away from home in the UK and £ 15 per day whilst overseas.
8 ) Working From Home :
If you work or run your business from home, then you may be able to claim an allowance, dependant on the circumstances depends how much you can claim.
Contact your local authority to find out about a reduction to your Council Tax for rooms used to run your business from. Warning : these rooms will be subject to Business Rates from this point, however currently the Small Business Rate Relief allowance / scheme is reducing most Rate liabilities to zero.