On 22 November 2023, Chancellor Jeremy Hunt presented…
With this blog we’d like to share with you some ideas to help reduce your tax bill and/or maximise your money.
Claim all valid business expenses in your company, such as:
- Use of home when doing billable work from home (you can ask us about the calculation if you’re not sure);
- Travel and subsistence to temporary workplaces;
- Mileage to temporary workplaces (you can ask us about keeping a logbook if you’re not sure);
- Subscriptions to trade related professional bodies;
- Mobile contract bills – change the contract to the business, and pay the total bill from the business bank account – one mobile contract per employee/director is allowed;
- Avoid buying things you don’t really need in the business purely to reduce your tax bill – the net effect will be increased cash outflow, so you won’t be in a better position.
Manage the funds you withdraw from your company:
- You have control over the amount of dividends you pay yourself, so make sure you don’t pay more tax than is necessary;
- High Income Child Benefit Charges can be avoided if you keep your total earnings below th £50k threshold (please refer to our blog for more info);
- You must manage any overdrawn director’s loan balances to avoid potential tax and interest charges – (please refer to our blog for more info);
- If you pay mortgage interest, then make the sums (over a period of a few years) to compare interest saved vs dividend tax paid at higher rate to help you decide whether it would be worth it for you to pay out more dividends to enable faster mortgage down payments;
Talk to a financial advisor about:
- Payments to a pension fund from your limited company – you can pay up to £40k per year and save Corporation Tax;
- Investment opportunities from your limited company – from a tax planning perspective this is fine as long as the company does not lose its trading status, i.e. investment activities becoming a significant part of what the company does;
Other tax planning opportunities are to:
- Involve your spouse/civil partner (who has no/little income) in your company and pay them a salary for their services and pay them dividends based on their shareholding;
- Involve your children of the age 13 or older in your business and pay them for their services (please note there are strict rules limiting the number of hours children are allowed to work);
- Claim Business Asset Disposal Relief when closing your company (please refer to our blog for more info).
Deciding what to do with the retained income in your company:
Unfortunately, there’s no clear-cut answer, and it’s like looking into a crystal ball. It’s very easy to advise in retrospect, but for tax planning you need to try and predict what will happen in the future. We can still help you though, based on your unique situation and your predictions. So please call us for a chat so we can see how we can help you reduce your tax bills and maximise your money.