Business tax planning
tips

There are some perfectly legal, highly lucrative ways to ensure you minimise your tax bill. Take a look!

Allowances and Tax Credits and Tax Reliefs

• Use your spouse’s allowance if s/he is not working and has no other income.
• Do not forget to claim NI if your spouse is a sleeping partner in partnership.
• Make sure you claim Tax Credits if you earn below £16,105.
• Put your teenage son on the company payroll.
• Make regular gifts to your children out of your ordinary income to reduce IHT liability. Claim Research and Development tax credits if you are spending money on R&D through your company.
• Invest in EIS and VCTs and claim 30% tax relief..

VAT

• The VAT flat-rate scheme can help you save VAT.
• Remember to claim VAT on entertainment for overseas customers.
• Remember to claim VAT on expenses in relation to staff functions and office parties.

Pensions, ISAS and Life Insurance

• Invest in Pensions and save higher rate taxes. Even if you are basic-rate tax payer, the government tops up your basic-rate tax to your pension plan.
• Use your ISA Limits and build a pot of tax-free income.
• Pay life Insurance through your company and claim expenses against profits.

Dividends and Wages

• If dividend planning is a problem, why not consider a dividend waiver or different classes of shares?
• If you are working for your own company, pay wages just to cover your allowances, and take the rest of your money as dividends. This means that you lower your overall tax liability.

Share capital and tax advantages

• Claim entrepreneurial relief on capital gains and pay 10% tax.
• Do not forget to make negligible value claim if your shares are worth nothing.
• Gift your shares to your spouse if you are on a higher income and s/he is not using her full basic-rate tax allowance.
• When Investing in a new venture, why not invest through a trading company to make more profit?

Employees

• Employ two part-timers rather than one full-timer; in this way, you use two allowances and pay less tax.
• Payment on Termination of employment is tax-free. Why not look into it?

Allowances on Vehicles/Company Vehicles

• Buy a hybrid car or a vehicle with Co2 emissions of less than 95gm/km and get 100% tax relief
• Claim mileage NOT car and fuel expenses if you have a new car as you can claim more.
• Don’t forget to claim back VAT on mileage.
• Claiming fuel, repairs, and maintenance for older cars and newer expensive cars is more tax efficient.
• When claiming VAT on fuel, don’t forget to pay scale charges.

Expenses

• Claim use of your home-office as office expenses.
• Where possible claim exempt expenses.
• Remember that you can put work-related training through your business and claim expenses.
• If you are relocating due to work, remember you can claim £8,000 relocation expenses tax-free.
• You can claim foreign travel expenses without receipts.
• Apply for dispensation and escape the hassle of reporting expenses on a P11d return.
• Bring forward necessary business expenditure to accelerate tax relief.

Others

• Do not hide your income. Always make a full disclosure on you tax returns to avoid prosecution and penalties.
• Always keep complete and full records.
• Always check PAYE coding notices and make sure they are correct.
• Convert from a sole trader to a limited company if your profit is more than £20K per annum.