Taxation law is something you can outsource to a specialist in today’s situation. Doing business has become more rigorous due to the mandatory necessity of complying with multiple & complex laws.
Taxation laws are challenging not only in our country but around the world, and not everybody’s cup of tea. You have revenue from almost every head as a company owner, apart from the ‘Income from salaries’ head.
You may end up paying large amounts of taxes to the government every year if you are not aware of tax-saving options. Fortunately, there are many tax savings techniques to reduce taxable liability as a company owner.
This post will address five tax-saving tips that any business owner and start-up should follow to avoid excessive taxes.
1.Know about VAT
Many businesses or companies are not aware of the Flat Rate system, but it results in unlikely profit sources for the right company.
In short, you pay a single, fixed VAT rate on your turnover under the flat rate system. HMRC has a list of the flat VAT rates available for various industries. E.g., it is 12 percent for estate agents and property managers, while for computer and IT consultants, it is 14.5 percent.
You choose the most appropriate VAT rate for your sector, add the percentage to your quarterly gross turnover and pay it to HMRC.
2.Working from home
HMRC allows attractive tax savings for self-employed or sole-properitorship businesses that spend time working at home. Ensure that an individual has awareness regarding them.
Most companies say a small home charge of only £ 2 per week, but HMRC makes you more than that. HMRC allows a much more scientific approach for determining what costs you can subtract for using your home for individual traders who work from home.
You will sue for a proportion of the following home costs if you are a self-employed business owner;
- Council Tax,
- Interest from the mortgage,
- For insurance,
- Light and heat,
- landline and Phone expenses
- Specific repairs & maintenance for households
3.Use fringe employment plans:
The ‘Use of Home’ provision Use of Fringe Employee Insurance Policies for firms that use a designated space in the house for work
Additional salaries cause payroll tax expenses for the organization. Certain taxes can be avoidable if the employer pays for employee fringe benefits. Tax-exempt advantages that you may consider giving your workers include:
- Health insurance funded by employers
- Insurance for Long-term Treatment
- Group term life insurance
- Insurance for Disability
- Educational support
- Assistance for Dependent Treatment
- Benefits for transportation
- Meals provided for the comfort of employees may also be beneficial.
4.Efficiently pay yourself
Undoubtedly, the amount an individual pays himself/herself from their corporation affects their tax amount. Often, how they pay themselves can have a crucial effect.
Dividends, salary, and incentives in kind all require consideration ongoing.
Using the personal car for business purposes is a popular advantage of its kind. On the basis of case-by-case, each case needs to be considered, but business owners will generally save some tax by getting a company vehicle.
It needs to take appropriate care to ensure that HMRC is immediately informed when employees obtain a car from the company. At the end of the tax year, this prevents an unpleasant tax bill.
Dividend payouts tracking must be done regularly, and only by maintaining up-to-date records that can provide monthly management information can this be done.
Dividends are a fantastic way to compensate critical individuals within the company, but caution must be taken not to break any company law, and eventually, HMRC.
5.Treat your Staff
Many tax-free incentives can be paid to workers to save tax on you and them.
It is always a good idea to take advantage of these benefits. The cycle-to-work system has been in effect for many years and can save up to 25% of a new bike’s cost and save taxes.
Various organizations, such as the NHS, are strong supporters of this method. In addition to being a tax-free benefit for employers, tax-free childcare vouchers are also a perfect way to save income taxes.
Using childcare vouchers in a salary sacrifice program, HMRC has decreased the amount of tax you can save, but it’s still worthwhile.
As a small business owner, you can decrease your taxable profits with smart planning and keep more money working for you. Just remember to consult accountants in Canary Wharf to ensure that the possible savings mentioned here qualify for you.