Like any other enterprise, small businesses here in the United Kingdom are legally required to pay tax and National Insurance contributions. While some small business owners may tackle their own accounting tasks, from bookkeeping to completing tax returns by themselves, others enlist a professional accountant to maximise their earnings by minimising their annual payments to HMRC.
In the following sections, we’ll run down some of the legal tactics that small businesses can use to reduce the tax and National Insurance they must pay.
Practice tax efficiency when taking out funds
Withdrawing money from your small business using tax-efficient methods is key. If the small business you run is a limited company, it’s a wise move to take money out of it using a combination of both dividends and salary.
Turn important employees into partners
If your small business is a partnership or operates as a sole trader, you can make substantial savings on National Insurance by turning your key staff members into partners. It will also allow these individuals to save while tying them into the small business you run.
Pay your spouse a tax-efficient income
While such a salary must always be practical and reflect the role they perform, a spouse paid over £111 a week will qualify for the State Pension and Additional State Pension. If their salary is less than £153, there is no liability for National Insurance contributions, but HMRC must be notified of all details.
Select the ideal time to invest in equipment
Small businesses making an investment in new enterprise equipment, from company fleet vehicles to computers and tools, should weigh up the right time to make a purchase. Tax relief is typically received far faster when equipment is bought shortly before – instead of soon after – the year end of your business.
Ensure HMRC understands you’re self-employed
If you operate as a sole trader rather than a limited company, it’s important that HMRC is aware of the way you work so it doesn’t over charge you mistakenly, believing you are an employee of a regular and high-paying client.
Use forward planning to save tax later on
Finally, there may come a time in the future when you want to cash in on your success and sell your small business. By putting appropriate plans in place at an earlier point in time, you’ll be able to retain more of its value and stop the taxman taking up to 59 per cent of the business’ total worth.
Are you looking for a small business accountant in Goole?
If you’re interested in reducing your company’s yearly tax bill and ensuring you receive a full tax refund for all of your expenses, we can help. At Adaptive Accountancy, we specialise in providing flexible accounting and bookkeeping services for small businesses. We provide a tailored service for our clients, so whether you want convenient updates by text or advice out of hours, we are always ready to assist. Contact us today and start saving money on tax.