We ensure we are up to date with all current tax legislation and to ensure the best possible tax advantages are available there are certain tax tips which can help your business.
As well as the specific tax tips below, there are a wealth of other tax tips and advice that we offer and execute. Additionally, the accurate and tidy keeping of records is very important.
Tax Tip 1: Ltd Companies
At the Summer Budget 2015, the government announced a reduction in the CT rate from 20% to 19% for the Financial Years beginning 1 April 2017, 1 April 2018 and 1 April 2019, with a further reduction from 19% to 18% for the Financial Year beginning 1 April 2020.. Therefore conversion from a sole trader into a limited company can be beneficial on a financial basis. This is compared to running your business under self assessment where Income Tax is 20% and Class 4 National Insurance is 9% for profits in the basic rate band. Dividend tax has come in from April 2016 at 7.5% above £5,000 so does complicate matters so incorporation is now less attractive depending on other factors like credibility, building a brand, profitability and limited liability. There are also cash flow advantages as corporation tax is payable in arrears as opposed to self assessment which is often payable in advance. Cash flow, limited liability and added credibility are now often more prominent factors in this choice than tax saving depending on the level of profit. Tax tip 2 is also relevant here.
Tax Tip 2: Company structure
Multiple employments saves dividend tax from April 2016 and the corporation tax/personal tax implications are neutral. Cannot be done under shared ownership or pooling of resources. Can have ownership of one company and no shares in the 2nd company with an employment. Having additional employees and shareholders can help save tax.
Tax Tip 3: Company pension scheme
This saves corporation tax at 19% and usually 25% of a pension investment can be withdrawn tax free at the age of 55. This also saves dividend tax so well worthwhile. Please contact the office to discuss.
Not a Tax Tip but...
....remember not to leave everything to the last minute. Deadlines should be used for information purposes and it is exremely helpful to be organised and send the required information to us well in advance of any final deadlines. Personal tax returns can be completed any time after April and the same applies to companies following the yearend date. In the last 18 months, we are pursuing an objective to be less hectic in January which is easier said than done. In November 2017, we have surpassed 50% of our tax returns to be done so encouraging progress.