Small business tax is a field that’s not straightforward and can be tricky for most business owners, especially those who just started a business and are new to this field.
However, if you take the time to work with a reliable accountant, it is not only possible to ensure everything is done properly, but you can also find a few ways to save on tax. Read more about tax on VATGlobal.
To help you with how you can pay less task, we have listed 10 tips for doing exactly that:
Know Your Niche
It is advisable to constantly engage with your trade body/association, read the newsletters and attend their events. Most industries have special allowances and dispensations approved by HM Revenues and Customs like uniform allowances. Your trade union or body are on your side and so, it makes sense to use them.
Know Your Value Added Tax
This is a common area where business owners go astray. Are you paying the right VAT amount? Are you aware of the Flat Rate Scheme? Most business owners and entrepreneurs don’t know the later, but for the right company, it can be a source of profit.
Basically, under the Flat Rate Scheme, you get to pay a single flat rate of your value-added tax on your turnover. HM Revenues and Customs have a list of the Flat Rates for VAT available for various industries. For instance, for property managers and real estate agents, it’s 12% and 14.5% for Computer and IT consultants.
You just pick the value-added tax rate that’s most applicable for your niche and apply it to your gross turnover in the quarter and then pay it to the HMRC. Usually, you cannot reclaim the value-added tax on your purchases, but you can keep the difference between the VAT that you charge the customers, which is usually 20%. You’re even given a 1% discount by HMRC in the first year of registration.
Dedicate More Time on Your Business
Chances are you are not the best individual to handle bookkeeping or accounting. You are more likely to benefit if you focus on the primary aspects of your business while delegating accounting and bookkeeping tasks to the experts. You might think that you are saving money in fees, but chances are you’re losing out by not claiming for what you’re entitled to.
HM Revenues and Customs allows substantial tax savings for the self-employed that work from home. As such, ensure you are aware of them.
Most companies just claim a home charge of £2 per week, but actually, the HMRC allows for more than that. If you run the business on your own and work remotely, HM Revenues and Customs allows a more comprehensive way to calculate what you can deduct for using your home. If you are self-employed, you can claim from a proportion of home costs such as insurance, water, council tax, mortgage interest, heat and light, phone costs, and even general home repairs & maintenance.
If you use a dedicated room in your home for work, the Use of Home claim can be quite generous. You can find more examples of what you can claim as the use of home expenses on the official HMRC website.
Talk to Your Accountant
Some business owners complain about their accountants usually due to the amount that they have to pay. Well, the reality is that those who see their accountants as trusted advisors and a person who can assist in saving tax usually end up paying the least tax. If you do not consult your accountant or can’t form a healthy relationship, it is high time you get another expert.
Treat Your Workforce
There are various tax-free benefits that can be paid to your workforce to save both parties tax. It is really a surprise that not many companies take advantages of such benefits. The cycle to work scheme has been there for a number of years now and can save up to 25 percent of the cost of a bike and making tax savings. Big organizations like the NHS are huge promoters of the cycle to work scheme, but smaller companies haven’t really hopped on board. Another great way to save on tax is through tax-free childcare vouchers.
Keep it In Your Family
Currently, the standard personal allowance is £11,850 of tax-free income. If you assess the situation of your family, it might be possible to use the personal allowances of members who carry our duties within your company.
Pay Yourself Efficiently
Obviously, the amount of money that you pay yourself from your company has an impact on the tax. Ideally, the manner in which you pay yourself has a substantial impact. As such, it is important to regularly consider salary, benefits in kind and dividends.
The use of a company car is one of the most common benefits in kind. Each case has to be considered on a case by case basis. Generally, you can save tax by having a company vehicle. However, it is imperative that you promptly notify the HMRC when a worker gets a company car. This helps you avoid a tax bill when the tax year comes to a conclusion.
Dividend payments, on the other hand, need to be monitored monthly, and this is only possible if you keep up to date records that can be able to give monthly management data. However, dividends are an excellent way to pay key individuals within your company but ensure that you do it carefully to avoid falling foul of Company Law.