10 Tax Saving Tips For Small Business Owners

10 Down & Dirty S-Corp Tax Tips. Posted on March 7. This entry was posted in Blog and tagged business owner. Small business, taxes. Bookmark the permalink. Here’s what you and your tax professional can discuss in order to help reduce your tax liability for 2020 and beyond 1. Determine whether your business may qualify for different tax treatment. Many small business owners can deduct 20% of. Create a smart plan for paying taxes.

  1. 10 Tax Saving Tips For Small Business Owners Tax
  2. 10 Tax Saving Tips For Small Business Owners Near Me

Here are some tax and finance tips which could help you save money as a limited company owner, based on our experience of running limited companies, and dealing with accountants and tax advisors over the past 15 years.

Why pay more tax than you need to?

  • Dividends are not subject to National Insurance Contributions, which represents a significant tax saving compared to the sole trader route, where NICs are payable on all income.
  • As a limited company director, you may consider paying yourself in dividends and a small salary. You may pay no PAYE (income tax) or NICs at all on your salary if it falls below the current threshold.
  • Whatever you do, make sure you meet your accounting and statutory deadlines, especially for submission of the Annual Return (AR01) and your company accounts. The penalties for late submission can be great.
  • Subject to eligibility (e.g. you must have held shares in the company and been a director or employee for a year or more), you may qualify for Entrepreneurs’ Relief on the sale of your limited company. The current ER rate is a mere 10%, compared to standard CGT rates of 20% or 28% (higher rate).
  • Consider the timing of your dividend declarations. You may save tax by delaying drawing down profits until a future tax year, if you have already reached the higher rate (or additional rate) threshold in the current year.
  • Consider splitting your shareholding with your spouse, as you could benefit from using your other half’s tax allowance (especially if they have no other source of income). You should consult an accountant before considering this option, as so-called ‘income shifting’ is a thorny issue in accounting circles.
  • Make sure you only declare dividends when there are sufficient accumulated profits in the company to do so. Penalties will apply to any dividends which have been declared illegal.
  • Make the most out of the expenses you can put through your company. As long as you only ever claim for things that have been genuinely incurred on business duties, there are savings to be made. You may be able to claim for the costs of working from home, for example.
  • Consider joining the Flat Rate VAT Scheme. Not only does this make your VAT accounting simpler, but you may pay less tax overall depending on the amount of VAT you charge and reclaim. During the first year, you receive an additional 1% discount on the flat rate you have to pay to HMRC.
  • The VAT cash accounting scheme offers more of a cashflow benefit than ‘tax saving’ per se – it allows you to only account for VAT once an invoice has been paid, rather than when it has been issued.
  • You must register for VAT if your turnover reaches £85,000 over the past 12 months (2019/20 tax year). HMRC have recently been clamping down on businesses who have failed to do so, and you could be fined.
  • Consider setting up an executive pension scheme. Your company can invest pre-tax income into the pension, saving you a considerable sum compared to investing post-tax income in a personal pension. Talk to an Independent Financial Adviser for more information.

Try our money saving tips for limited companies for more ideas on how to make your business more lean and efficient.

As ever, please consult your accountant before acting on any of the information contained on Company Bug.

More on limited company tax rates.

The Top 10 Tax Saving Tips to help Business Owners

10 Tax Saving Tips For Small Business Owners

Well it is fast approaching that time of year again, but don’t despair it is not too late to maximise your tax, we asked our tax accountants to come up with 10 tips to minimize your tax bill this year!

The Top 10 Tips are:

10 Tax Saving Tips For Small Business Owners
    1. Try and work out roughly what your net profit will be this year, in some cases such as where you keep your record fairly up to date this will be easy, don’t forget to allow for tax deductions that might not be as obvious like the tax break and depreciation of plant and equipment. Once you know this you should have some idea of what you tax bill will be and how much money you have to play with.
    2. Look at easy tax effective strategies first, one of the easiest methods to reduce your tax bill as a business owner is to make additional contributions to super that way you are saving for your retirement and saving tax at the same time. Do be careful of the super contribution caps though.
    3. If you run your business through a company you should look at how much you want to pay yourself as an employee and how much you want to leave in the company. For this year (2010) individuals will pay tax on income between $37,000 and $80,000 which is the same as the company tax rate of 30% (ignoring Medicare levies).
    4. Keep track of business car use, (preferably using your diary or a log book) some many people say they don’t use their car for work and yet when quizzed make trips to the bank, office works, picking up interstate staff from the airport, attending seminars and work functions etc. These small and sometimes infrequent trips can easily add up to several hundred dollars of tax deductions, especially if you keep track of them properly. If you use your car for work a lot you should consider if your current recording method is the best, possibly a nova-ted lease or chattel mortgage may be a better and more tax effective option, please contact us for professional advice.
    5. Do you have Income Protection and/or Key man insurance? If so depending on your circumstances these premiums are generally tax deductible, you can pre-pay the next 12 months premiums and claim a tax deduction in this year. Again please contact us if you are considering this so we make sure you do it right.
    6. Structure your investments to maximise their tax effectiveness and invest in tax effective assets to begin with, if you think your tax bill will be high this year or you want to really maximise your refund there are a range of investment strategies to achieve this like pre-paying the next 12 months interest on your investment loans(s).
    7. Keep track of home office use, just like you car it is amazing how much time we all spend working these days including checking e-mails and doing research after hours and on the weekends, if possible keep a diary of your home office use.
    8. Keep all of your medical receipts; did you know that if you spend over $1500 on medical expenses in a year the ATO will give you 20% of the excess back? It is amazing how many people do not even know this rule exists.
    9. Start investing in tax advantaged investments, you can start by using our online tools to do a budget and see how much money you have available to invest, then look at the many tax advantaged investments and investment strategies available. Ask yourself would you rather invest your money or pay it to the government?
    10. Lastly if you are still worried about your tax bill or would like some personal advice book in to see one of our tax advisers, we charge $110 for a consultation which is also a tax deduction!

10 Tax Saving Tips For Small Business Owners Tax

We hope this helps, over the long term being smart about your taxes can make a huge difference, one of the biggest advantages of owning your own business is the ability to plan and adjust your tax bill legally and easily, don’t let that opportunity pass you by you only have till June the 30th to make any meaningful changes.

10 Tax Saving Tips For Small Business Owners Near Me

For more information or a confidential discussion of your needs, please call the office on 1800 556 122 or contact our Small Business Accountants here.