If you are a business owner, the likelihood is that you have to pay tax, including corporation tax, income tax, capital gains tax and others. Although most business owners are happy to pay the right amount when it is due, it is still preferable to pay the lowest amount legitimately possible. Minimising your tax bill could save you lots of money, which could be used to build the company and invest. There are many ways to cut your tax bill in a legitimate manner.
Claiming expenses
There are so many companies that don’t claim the expenses they are able to. Sometimes, this may be due to a lack of knowledge, as there are plenty of complex rules surrounding this area. For those companies that have an accountant, if they are eligible to make a claim for expenses they will be encouraged to do so. Some examples of expenses include computers, mileage, business phones and broadband services.
Taking dividends as a salary
An accountant may advise you to take your own salary as a small amount that is covered by your personal allowances. The remainder will be paid in dividends, after corporation tax has been paid against the company profits. By doing this, no tax is paid on the salary as it is covered by personal allowances. Paying tax on dividends at the rate of 32.5 per cent is cheaper than paying the higher rate of tax at 40 per cent.
Invest in a pension scheme
By increasing pension payments, you will receive tax relief on the contributions. You could reduce the corporation tax that is payable on company profits by upping pension payments. A professional accountant will help you to deal with all the regulations, and therefore reduce your tax bill.