top of page

5 Ways On How To Reduce Your Tax Liability

To some companies, taxes can be a big problem most especially when funds aren’t enough to pay for these. You don’t have to wait the end of the year to mitigate your tax bills. As early as today, you should be able to ensure you have put plans in place. Listed below are five ways you can reduce your tax liability so that you can make most of your hard earned money.

1. Make sure you are claiming tax relief on expenses

This can save you a minimum of 20% in tax. Also, do not forget to claim reimbursement to any personally incurred expenses. You have to classify it as a business expense so that it can properly be recorded in the business. Other tax efficient expenses are company-owned mobile phones, childcare costs and relevant life insurance policies. You can gain around 40% of the cost if you claiming it and extracting profits from your company free of tax. Most importantly, you have to speak with your accountant and ask advice whether an expense is allowed.

2. Make sure you are up-to-date on your company’s tax position

Bear in mind that by knowing your tax situation, you will know the amount you can take as a dividend. You have to hire an accountant who can determine how much profit the company has made at any point in time. It will be important for you to know how much is the maximum amount you are allowed to take as a dividend because anything over will not be permitted under the Company Law. A good accountant can give you this information that is why it is important to invest to an accountant with good experience. You can visit Eclat Accountancy Ltd if you want to have certified accountants to assist you with this. Visit their website here.

3. Identify how much you can take as a dividend

By identifying how much you can get as a dividend can give you a hint on the tax implications associated with it. You don’t have to take all company profits as a dividend. In fact, you can just take an efficient amount to ensure you do not breach the higher rate tax threshold. Remember, if you take more than that, 25% of it will be lost in personal tax. You need to consider all possible options before making a move. Always consult your accountant.

4. Register for flat rate VAT

This is recommended to companies who has a turnover less than £150,000 a year, has low expenses as a proportion of turnover and has clients who are VAT registered. By registering for a flat rate VAT, you can save hundreds of pounds a year. Your accountant should be able to have an idea with this.

5. Consider some support services

As the owner, you need to consider the support you need to help you to run your business efficiently. Therefore, you need to make the most out of the tax breaks available. It is important that you have an accountant to do your year-end accounts and tax returns. This is to ensure you have the right reports for the filing. And most importantly, having the right documents can avoid paying for penalties. It can greatly save you money which you can use to further improve your business.

5 views0 comments
bottom of page