It’s never a bad idea to revisit some of the key ideas around tax saving. As business accountants one of our primary concerns is that we are saving our clients as much tax as possible. For any business, the quickest way to increase your income is to reduce your tax bill!
Here are 5 of our top tax saving tips:
1. Record keeping
Our accountants have sat in on many HM Revenue & Customs investigations over the years and a point that is always key to tax deduction is having a receipt or record of the expenditure. Often it can be as brutal as no receipt = no tax deduction.
This aside, you can lose possible tax deductions through loosing receipts, especially those you do not pay from your bank account – think about the fuel you paid cash, that Costa you had while working away that that paid cash, the eBay purchase you did using PayPal that had funds already in etc.
Receipt capture technically (apps!) can help with this (Receipt Bank, Auto Entry etc). You can train yourself to not walk away from the counter without snapping that receipt!
The other thing that can really help is cloud accounting packages such as Xero or QuickBooks. These will help you reconcile every transaction to make sure you haven’t missed any expenditure.
2. Understand the basics for tax deductions
Generally you can claim any cost that is ‘wholly and exclusively’ for the use of business. If only it were that simple!
Sadly there is no hard and fast rulebook for every known expenditure, and some have very specific rules. To give you some ideas, you can review our start up guide here .
3. Understand when it’s a good idea to be a Limited Company
When you start earning a reasonable amount of money a limited company structure can help your business save a lot of money. In order to do this you need to figure out (usually with professional help!) how best to pay yourself and tweak your business expenses for the most tax efficient option.
The big question of ‘when is it a good idea?’ depends on your circumstances, but to put a rough value on it, around £30,000 PROFIT a year is generally a good time to look at it. That said, due to it being very dependent on your personal circumstances, we have many limited companies at below this amount.
There is more detail on this, including the ‘pros and cons’ of being a limited company in our start up guide here.
4. Understand how VAT works (and when it’s a good idea to be VAT registered)
VAT is like a Dark Art, both in getting it correct and maximising the opportunities to claim. For example, knowledge such as how to claim VAT on:
Mileage payments (to you or employees)
Small staff gifts
Kitting out your home office
… to name a few.
We chat more about this topic and whether it’s a good idea to be registered on our blog here .
5 Get an accountant
Yeah yeah, we are biased. The UK tax code is 22,000 pages and growing – that’s 10 million words, more than 12 times to the size of the bible!
In addition to this, what is tax deductible or not can change daily based on what is happening in the tax courts.
A good accountant will help navigate this and help take care of many of the points above, making it a great investment for your business.
If you need any help with the above, please in get touch with the team – we’d love to help!