Why pay more taxes than you need to?
No one likes taxes, especially small business owners. Here at The Fishbourne Accountant we’re committed to helping you reduce your tax spend by making you aware of the areas that you could be saving on. Want to know more? Keep reading…
Take advantage of opportunities
There are lots of tax relief opportunities available for small businesses and individuals. Saving on taxes is all about being aware of the types of tax relief available and understanding which ones can legally be applied to your situation. Although we always recommend consulting with your accountant when it comes to tax reduction opportunities it doesn’t hurt to be informed of where you could be making savings:
- Married Couple’s Tax Allowance: allows you to give £1,250 of your personal allowance to your partner providing they earn £12,500 or less, this can reduce tax by up to £250
- https://www.gov.uk/apply-tax-free-interest-on-savings: Earn up to £5,000 interest on savings if you are a basic rate tax payer.
- Research and development Tax Credits: Providing 230% tax relief on qualifying R&D costs for SME businesses
- Enterprise investment Scheme: Provides tax incentives (income tax and capital gains tax reliefs) to those who invest in small unlisted businesses
Accuracy helps avoid unnecessary expenses
Taxes and tax returns are often the bane of a small business owners life. You might even liken them to taking the bins out, letting things pile up until you have no choice but to deal with them. We don’t blame you.
So what does this have to do with saving money on your taxes? Lack of accuracy and a ‘that will do’ approach can lead to overpayment or underpayment of taxes. Underpayment you say? Great! Not so much when you end up in HMRC’s bad books and you’re lumbered with a fine for careless record keeping. If you’re uncertain about (or don’t have time to complete) your VAT return, income tax return or corporation tax return there’s always a solution! Leaving it the hands of a qualified accountant will be more cost effective than dealing with late returns fines and being hounded by HMRC further down the line.
Knowledge is power
Knowing the ins and outs of taxes will not only ensure that you stay on the right side of the law, it will also help you make tax-friendly business decisions more easily:
- Understanding expenses: It is important to know what is a valid profit and loss expense, and what is a capital item. By understanding expenses it allows you to make the necessary deductions, you can also weigh up options by which is tax deductible (for example, entertainment is not a valid expense, but you can make tax allowances for up to £150 per employee for a staff christmas party).
- Capital Gains Tax: When an asset is sold any profit made will be taxed, with the exception of certain tax-free assets. However, there are common areas where unprohibited deductions are attempted to try and reduce tax spend (such as deducting property repairs from the gain if a property sale). By understanding where deductions can and can’t be made it will help prevent you getting yourself in a legal pickle.
- Claiming capital allowances and Vat: Being clever with your purchases and keeping your capital allowances and VAT knowledge in mind will help you make tax saving decisions. A prime example is the decision made on the purchase of a new vehicle ie car versus van. Capital allowance reclaim on vans is quicker than on cars because they are deemed plant and machinery rather than motor vehicles so you get higher tax relief in the year of purchase. Also any private use of a limited company owned car can have significant tax consequences for the individual whereas with a van this is not so drastic. There is no VAT reclaim on cars except in restricted circumstances (50% reclaim on lease cars, allowances for Ltd company pool cars with 100% business use only). Therefore, most limited companies or sole traders are better off opting for a van (providing they suit their needs) as these provide a safer option when it comes to capital allowances and other taxes too.
Your tax saving opportunities are as unique as your business. Although this blog shares some ways to save on your taxes we can’t stress enough the importance of having an accounting professional by your side. We’re here to make sure you’re never paying more than you need to, just give us a call on 01243 532490 or email monica@thefishbourneaccountant.com
