There are following tips from Practice Eye for small business that they follow to save tax :
1. When
setting up as a sole trader, you can claim against your profits for
items used in your business even if they were purchased prior to commencement
of trade.
2. A
director of a limited company can withdraw a total of £38,474 during 2014/2015
without having to pay any additonal income tax or national insurance.
3. The
Annual Investment allowance at 100% is increased from 250,000 to
500,000 for 2 years from 5 April 2014 It is essential to plan purchases
carefully to maximise the relief available, particularly where the accounting
year end spans the date of the change.
4. Consider
your method of drawings from the business. If a limited company,
paying a small salary up to the personal allowance and the balance as dividends
is normally the most efficient method, however this is not always the case.
5. Put
any mobile phone you have in the business name and all costs of the
phone are deductible (you do not have to split business vs non-business calls).
6. In
most cases it is best to run your own vehicle personally and claim milage using
HMRC authorised milage rates, where you trade via a limited company this will
avoid large taxation charges on the use of company cars in most cases.
7. If
you work from home you will be able to claim a deduction to cover part
of your home running costs. HMRC allow (a modest) £4/week flat rate without
requiring any evidence. If you spend a significant amount of time working from
home then it is likely you will be able to claim more using the
"appointment method". Please contact us for futher information if you
would like help with this.
8. Married
couples/civil partners should ensure that their finances are arranged
to utilise each personal allowance £10,000 basic for 2014/15 (£10,660 for those
born before 05/04/1938 and £10,500 for those born between 06/04/1938 and
05/04/1948) and lower rate tax bands (£31,865 for 2014/2015). It might be
sensible to transfer income producing assets to a spouse to take advantage of
their lower taxable income.
9. Make
contributions into a pension scheme. Pension contributions tend to be
deductible expenses for the company, and suffer no immediate tax charge on the
individual. Where an individual’s adjusted net income for 2014/2015 is more
than £100,000, their personal allowance will be reduced by £1 for each £2 of
excess. Consider making individual pension contributions to preserve personal
allowances. Individuals could save £4,000 in 2014/2015 at 40 per cent, or more
if relief is available at 45 per cent. This is because adjusted net income is
reduced by individual pension contributions. However, the impact of pension
anti-forestalling rules and the reduced annual allowance needs to be borne in
mind. It may therefore be advantageous to transfer income-producing investments
to a spouse.
10. Use
a salary sacrifice scheme to pay for employees childcare costs of up to £243
per month tax free. Childcare voucher schemes are tax free for the
employee and the business operating the schemes incur no Employer’s National
Insurance. For higher rate taxpayers joining schemes after 6 April 2011 the
level of the tax exemptions may be limited but this will be determined by a
“basic earnings assessment” carried out by the employer.
11. Capital
Gains Tax - you each have an exemption for Capital Gains (£11,000 for
2014/15). It makes sense to use this if you can. If you intend selling assets,
it may be worth transferring them into joint names or spreading the disposal
over 2 years. The rate at which Capital Gains Tax is payable will depend on a
number of factors but broadly basic rate tax payers will pay 18% and higher
rate taxpayers will pay 28%. In some circumstances the capital gains tax rate
can be reduced to as little as 10%. With the capital gains tax rates
significantly lower than the 45% top band of income tax there are a number of
planning opportunities.
12. Where
you work for only one client or a number of clients on short term
engagements you may have to consider the impact IR35. IR35 was legislation
introduced to ensure that there was no avoidance of tax by the use of limited
companies. Broadly where the relationship between the worker and client would
have been one of employment had the limited company not have been imposed
between the worker and the client then IR35 could apply. This would mean that
there would be significant extra national insurance charges etc. imposed on the
worker. Factors sush as the use of a substitute, holiday pay and mutualilty of
obligation would be some of the relevant factors used to ascertain whether the
worker comes within IR35. Please contact us to discuss if you think that this
may be relevant to you.
13. Automatic
penalities are now imposed if you do not file your Self Assessment Tax
Return on time. Do not forget there is an automatic £100 fine if you do not
file your return by 31 January following the end of the tax year (by 31 October
if you are filing paper returns). Further daily penalities mean that a tax
return that is over 6 months late costs cover £1,300.
