As a business owner, you want to keep your tax costs as low as possible. The salaries that you and your employees earn will be subject to Income Tax and National Insurance. The business itself must be registered for VAT, with Corporation Tax being paid annually based on the profit that your company makes.
There are tax-efficient methods that can be used to reduce your taxes. Tax avoidance tips for limited company and corporation are detailed here…
How to avoid tax as a Limited Company
To pay less tax as a limited company you can claim:
- Heath check and eye test expenses – using computer screens as a big part of any job entitles you and your employees to claim for eye tests and glasses or contact lenses for business use.
- Business insurance – include public liability, employer’s liability, and contents insurance.
- Advertising and marketing expenses – if the investment is purely for business purposes it can be claimed as a limited company expense.
- Bank charges – bank fees charged to business accounts, including credit card loan and interest can be claimed as business expenses.
- Telephone bills – communication utilities including phone and broadband access can also be claimed.
- Pensions – as you pay into a pension pot you can get 100% tax relief as a limited company expense, with a £40,000 limit.
In addition, you can:
- Use your Personal Allowance – your income won’t be subject to tax on earnings less than £12,750.
- Get National Insurance benefits – see if you’re able to claim for a range of benefits if earnings are more than £6,240.
- Avoid penalties from HMRC – make sure you submit tax returns on time.
- Keep up with government schemes and initiatives – get financial support as necessary.
How to avoid paying Corporation Tax
Look at a guide to reducing Corporation Tax:
- Claim all business expenses – include car mileage which can mount up, with up to 10,000 miles able to be claimed at 45p per mile.
- Pay HMRC earlier than needed – this will be rewarded by paying less interest.
- Take advantage of the Annual Investment Allowance – up t0 £200,000 can be offset against purchasing of assets to keep and use in your business.
- Claim tax relief for research and development – if your business is developing new products, processes, or software you could be entitled to additional tax relief of up to £24,700 for every £100,000 spent on research.
- Withdraw dividend payments – if your company has made £20,000 profit up to £16,200 can be used as dividends.
The difference between tax evasion and tax avoidance
Tax evasion is taking illegal steps to avoid paying tax such as not declaring income. Tax avoidance is defined as legal measures used to pay the lowest rate of tax as explained above.
Get bookkeeping services in London
A reputable accountant in London will save you time and money by providing you with a dedicated VAT expert. And will ensure you’ll be able to claim back any VAT on all business expenses you incur. You’ll be given all the help and advice you need in selecting the best VAT scheme for your company, and so much more tax avoidance advice.
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