Whether you’ve been running your business for a while, or are a new business owner, one thing we all have in common is that we want to be as tax efficient as possible whilst staying on top of our tax affairs.
There are a number of ways to ensure you are not paying more tax than you should, and in this blog post we will explain what you can do to help your business to be more tax efficient.
1. Take advantage of the super-deduction tax break
Announced in April’s 2021 budget, the super-deduction tax break allows companies to claim 130% of what they spend on equipment for their business against taxable profits.
The super-deduction offers first-year tax relief on plant and machinery investments from April 1st 2021 until March 31st 2023. This allows companies to save a reduction in tax of 24.7p for every £1 spent.
2. Contribute to your employees’ pensions
Employer pension contributions can provide significant tax benefits for limited companies. These contributions are a legitimate business expense, and as such can be offset against the business’s corporation tax.
The process can be fairly complex, so it’s advisable to seek specialist advice on pensions before making contributions to an employee pension scheme.
Read more in our guide to pensions.
3. Plan for the 2023 tax rise
We already know that the rate of corporation tax will increase in April 2023 to 25% (from the current 19%), so now is the time to start planning accordingly. The 6% rise will affect larger businesses, however SMEs with less than £50,000 profit will continue to pay corporation tax at the current rate of 19%.
Read more about the changes to corporation tax.
4. Claim all allowable expenses
If you don’t claim all allowable expenses, not only are you missing out on tax relief from the claim, but you will also be paying more on your corporation tax bill.
We advise keeping a record of everything purchased for the business in order to avoid any mistakes when making your claim. This can include office equipment, business travel expenses, and any costs associated with working from home.
As they say, “every little helps!”
5. Pay HMRC early
Something many business owners don’t realise is that if you pay your tax bill early, HMRC will actually reward you by repaying some of it back in the form of interest (the current interest rate is 0.5%).
Setting aside tax each month and planning for an earlier date than the final deadline will help you to ultimately pay less tax.
It’s also worth noting that paying your bill late results in being charged a higher rate of interest than you would receive by making your payments early.
If you have any questions, or would like us to take a detailed look to see where you could make some savings, feel free to get in touch with us here at Magpie Accountancy.