Do you know How To Save Tax or any Tax saving tips? Reducing” the amount of tax you pay is a tricky concept. Most responsible individuals and businesses want to pay the correct amount of tax that they owe – but equally, don’t want to pay more than they have to.
Here are some common question related to tax saving people search on the internet:
1) How to save tax on salary in Uk
2) How to reduce income tax
3) How to save tax on a high salary
Claim your expenses:
The Corporation Tax rate for company profits for the 2018/19 tax year is 19% – a business with £100,000 in annual profit will pay £19,000 in Corporation Tax.
The key to making sure you pay no more Corporation Tax than you have to is to claim every allowable deduction and expense to give an accurate picture of your profits.
If you paid £5,000 for a new piece of equipment but forgot to claim the capital allowance you are entitled to, your profits may be overstated by £5,000 – so you’ll pay £1,000 extra in Corporation Tax. It literally pays you to stay on top of these things.
Every situation is different, and there may be allowances or deductions for your specific industry (as always, check with a tax expert if unsure), but there are a few basics every business owner should know to make sure they’re not paying more tax than they need to.
Now make sure you’re claiming everything. It may seem like a hassle to record every £3 bus ticket and £2 pad of paper, but over the course of a year those items add up.
You’ll have industry-specific items to claim too – there are no hard-and-fast rules on what you can’t claim. What might be a clearly-excessive luxury for one business could be a run-of-the-mill necessity for another. Just remember HMRC’s “wholly and exclusively” rule; anything you claim must be entirely for business use.
Some other expenses you may not have considered include pension contributions and professional insurance. Both of these can be paid through your company, rather than by you personally.
When running a limited company solo it can sometimes be easy to forget that your business is a separate legal entity – your business’ money isn’t yours! So, to get it into your pockets, you need to pay yourself a salary.
Salaries are business expenses, which reduce your profit and, in turn, your Corporation Tax. So before it’s time to pay tax on your profits, pay yourself!
A word of caution though. Many business owners pay themselves with a mixture of salary and dividends – dividends are drawn from profit, so you need to be able to show you have profits available before issuing dividends. Otherwise, HMRC will most likely reclassify your dividends as salary and you’ll need to pay Income Tax and National Insurance Contributions.
Consideration should also be given to the timing of capital expenditure on which capital allowances are available to obtain the optimum reliefs.
Single companies irrespective of size are able to claim an annual investment allowance which provides 100% relief on expenditure on plant and machinery (excluding cars). The amount of AIA available for a particular accounting period varies depending on the accounting period.
|Periods from:||Annual limit|
|1 April 2012||£25,000|
|1 January 2013||£250,000|
|1 April 2014||£500,000|
|1 January 2016||£25,000|
There are special rules where accounting periods straddle one of the above dates.
Groups of companies have to share the allowance. Expenditure on qualifying plant and machinery in excess of the AIA is eligible for writing down allowance (WDA) of 18%. Where the capital expenditure is incurred on integral features the WDA is 8%.
100% allowances on designated energy saving technologies continue to be available in addition to the annual investment allowance. Details can be found at www.etl.decc.gov.uk.
Limited allowances are also available for investments in certain types of building.
Companies incurring trading losses have three main options to consider in utilizing these losses:
- they can be set against any other income (for example bank interest) or capital gains arising in the current year
- they can be carried forward and set against trading profits arising in future years
- they can be carried back for up to one year and set against total profits.
Directors/shareholders of family companies may wish to consider extracting profits in the form of dividends rather than as increased salaries or bonus payments.
This can lead to substantial savings in national insurance contributions.
Note however that company profits extracted as a dividend remain chargeable to corporation tax at a minimum of 20%.