Here at Atkinson Accounts we understand that saving money is a top priority for your business, especially when it comes to tax. After all every penny is better off in your pocket than the tax man!
We have included a handy checklist for you to consider any applicable points which could save you considerably. If you need advice with checking some of the boxes, please give us a call on 01244 31 6449 or email us on firstname.lastname@example.org. Alternatively return the below checklist by email and we will get back to you.
1. Are you taking money out of your business in the most tax-efficient way possible? If your business is a Limited Company, and is the main source of income for directors, the best way to save money on tax is to withdraw funds from the business with through a combination of salary and dividends. There are other tax efficient options.
2. Are you utilising your spouse/family members tax allowances? Every individual is entitled to a £11,850 tax free allowance. You should consider whether any work undertaken by any family members or your spouse is paid at the most tax efficient salary. For example, if your wife or children assist you with any decision making or admin work they may be paid a salary of £8,424 without having to make National Insurance contributions. It is important to note that the salary should reflect work completed and their salary should be reported to HMRC – so a payroll will need to be run.
3. Do you have a personal computer or any machinery that was bought before you set up your business? You are entitled to bring this into the business, regardless of when it was purchased. This is providing it is for business use and remains functional.
4. Are you timing the purchase of any new vans, tools or computers correctly? If you are purchasing an asset around the same time as your company year end always try to do this before the year end. This way your business will feel the results of the tax relief a lot quicker than if you wait until the next years accounts and corporation tax are filed.
5. Are you VAT registered? Even if your turnover is below the registration limit, for some companies this is beneficial. If your business is not VAT registered, we would recommend considering who it is you are selling your products/services to and who it is you are buying from. If you are buying and selling products to/from a VAT registered Company, it would save you money by registering for VAT. You would then be able to claim the VAT back on purchases made – and add 20% on to your sales so you will not be taking less. This is ideal if your client base is also VAT registered as they will not feel the hit of the additional VAT as they will be claiming it back – just like you! However, you should also consider how your non-VAT registered customers would take this – will they still purchase from you if your sales price increased?
6. If you are not VAT registered, how do you ensure you are still entitled to stay non-registered? If your sales in the previous 12 months are more than £85,000 then you must register for VAT immediately. For this reason, and to avoid any penalties it is crucial you are monitoring (or have a good idea) or your cumulative sales each month.
7. Have you considered switching to a Flat Rate VAT Scheme? If your net sales are less than £150,000 you are eligible to apply for the Flat Rate VAT scheme. Under this scheme, you will pay VAT as a flat percentage of your sales – instead of calculating the net due from VAT paid and received. The flat rate percentage differs depending on your businesses industry – if you need to know what your rate would be please contact us. The Flat Rate Scheme is often easier to calculate and can save you considerably with the VAT.
8. Are you making the most of your pension scheme? Not only are pension schemes highly tax efficient, they also work as a way of rewarding way of retaining key staff. The employer contributions that come along with the pension scheme can provide considerable savings for your business. By law, due to auto-enrolment changes all businesses are required to have a pension scheme, so why not make the most of it?
9. Do your employees use their own car for business? If the answer is yes you should ensure you are utilising the mileage allowances. For the first 10,000 miles, you can pay your staff (and yourself) up to 45p per business mile tax free. It is also important to let your employees know that in cases where they are paid less than the 45p per mile, they are entitled to claim the difference back from HMRC.
10. Are you claiming for all business expenses? A lot of clients we see are not aware what they are entitled to claim for. Do you use your personal mobile for business calls? Do you ever work from home? Do you take your staff out for a Christmas night out? Have you paid any tunnel or parking fares? If the answer to any of these was yes, then are you claiming for these expenses? They are just some of the most commonly overlooked – if you would like the full list please contact us.
11. Have you considered what you will do to minimise your tax bill when you eventually come to sell the business? A lot of clients we have seen over the years do not even think about their winding down until they are approaching the end. In order to sell on your business in the most tax efficient way possible it is always beneficial to consider this as the business is trading through the years. Ways to minimise the eventual tax bill would include withdrawing as much of the company funds as possible throughout the years (without incurring a high tax bill in the years you are withdrawing).