Here we list some tips which may help you save some tax as a small business owner.
Are you paying more tax than you need to?
- Consider trading via a Limited Company and remunerate yourself through salary and dividends.
- Dividends – Even though they are now being taxed over £5,000 (£2,000 from April 2018), dividends are not subject to national insurance contributions which may result in a significant tax saving compared to the sole trader route, where NICs are payable on all income.
- Salary – As a limited company director, you may consider paying yourself a small salary. You may pay no PAYE (income tax) or NICs at all on your salary if it falls below the current threshold. The salary is treated as an expense for the company hence saving corporation tax.
- Consider the timing of your dividend declarations. If you have reached the higher rate threshold in the current tax year, delaying any further dividend declaration until a future tax year could save you tax.
- To avoid penalties, please ensure that you meet the deadlines for submission of the company’s accounts, tax returns and the confirmation of statement (previously the Annual Return).
- Consider splitting your shareholding with your spouse, as you could benefit from using your other half’s tax allowance. As this is a tricky issue please do consult an accountant before considering this option.
- Only declare dividends when there are sufficient profits in the company to do so. Penalties will apply to any dividends which have been declared illegally.
- Claim all your business expenses in full and you could save tax. Consider claiming business mileage, use of home as office etc.
- Even though the advantages of being on a flat rate vat scheme have been restricted for some, you may still benefit from this.
- Contribute into a pension fund. The company could make employer’s contribution into your personal pension plan saving corporation tax. Talk to an Independent Financial Adviser for information and advice on pension products.
- Claim capital allowances when you purchase any fixed assets. Get advice on this if needed.
9th April 2017
Categories:Tax changes and impacts