Tax Advice for Small Businesses and Startups
Tax is an inevitable part of starting and operating a business. It only makes sense paying attention to it. While you can rely on accountants to help you with taxation, you can find many good accountants in Central London for example, it would be better if you know something about dealing with taxes. Consider the following tax advice for your small or startup business.
- Deductible items from profits include those that you bought even before you started your business as long as they are related to the operation of your business. You can consider them as part of your expenses.
- You may be able to lower your taxes in the UK by becoming a corporation. Corporate tax rates can be lower than those imposed on sole proprietorships or other forms of businesses. Carefully weigh your options, though, because recent changes in taxation may make this tip less than viable.
- Pay salaries or wages to everyone involved in your small business including family members. Salaries are a reasonable expense for every company that can be deducted from the profits, which in turn reduces the tax liability. You can even pay a personal allowance to yourself aside from the dividends.
- Take advantage of the salary sacrifice scheme to pay for the childcare costs of your personnel. Childcare voucher schemes are given free of charge to employees so your business no longer has to pay the employer’s National Insurance.
- Make the most of the UK’s capital allowance scheme, wherein you can claim 100% tax deductions on the cost of business equipment you acquire for up to £200,000. If you are planning to purchase machinery or plant equipment, it is advisable to commit to buying them before the year ends as the capital allowance scheme permits the deduction of the capital asset’s full cost (up to £200,000) for the year’s income.
- Phone costs can be considered legitimate business expenses so it would be better if you put your mobile phone under your business’ name. Again, as an expense, it can be deducted from your profits, hence lowering your tax liability.
- Avoid higher taxes on company cars by running your own vehicle and claiming mileage through HMRC authorised mileage rates.
- Spouses of businessmen have lower tax rates so if you are running a business and you have other income sources that you don’t need to run by yourself (property rentals for example), you can save on your taxes by transferring them to your spouse. Also, take advantage of the personal tax allowance and basic tax bands granted to married couples.
- It can also help lower your tax obligation if you contribute to a pension scheme. Pension contributions can be regarded as deductible expenses for businesses.
If you run a startup or small business, use the tax saving tips briefly discussed above. You can legally lower your tax liability so don’t resort to illegal or dubious means to reduce your taxes.