If you run a limited company, here are five steps on how to save your company some Corporation Tax or getting from the company tax efficiently.
One of the advantages of being a shareholder in a limited company is the capacity to received dividends. Dividends have a lower tax rate compared to other types of income and do not have a National Insurance liability.
A limited company must have ample retained profits in order to pay any dividends. Corresponding paperwork must be done correctly and this must be declared properly in accordance with the law requirements of the company.
If a company decides to use the dividend route, it must make sure that those receiving dividends obtain a salary high enough to maintain their National Insurance Contributions record.
A limited company can contribute pension towards its contractors. These pension payments are deductible expenses for Corporation Tax purposes in the year they are made.
The Small Self Administered Scheme (SSAS) or a Self-Invested Personal Pension (SIPP) are pension vehicles that are useful when business premises are being bought. It is a common practice that the rent obtained will not be taxed in the SSAS/SIPP and the company usually obtains a tax deduction for the rent paid. This is very beneficial when the owner sells the business. It is a better scheme to sell the business and have it rent its premises from one’s pension fund compared to selling both the business and the premises.
Annual Investment Allowance
The annual investment allowance, or AIA for short, is a capital allowance that offers a full write-off of qualifying capital expenses within the financial year of purchases for plant and machinery. The capital allowance annually is £500,000 until 31 December 2015.
Owning cars personally or using a company car has its own respective benefits. Using a company car will subject one to the benefit-in-kind and the company needs to pay Class 1A National Insurance.
The benefit in kind and mileage will not be provided if a car is owned personally. Choosing the right kind of car ownership depends on the circumstances and the car involved.
Family members who work or help in the business can be considered as owning their own shares in the company. This will allow a company to make use of the basic rate allowance. They can also obtain dividends.
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