Costs mount up for any business that is just setting up, sometimes before any turnover has been recorded. That’s why planning and getting to grips with tax is vital. Here are a few pointers to guide you in the right direction, and to help you to discover that, if you arm yourself with some key information, tax doesn’t have to be taxing.
Tip 1 – Make a plan
Nothing is more important to minimising your tax bills than doing some effective tax planning. Get acquainted with HMRC’s website. Sign up to receive their regular emails, which always contain a wealth of information.
In most cases, the first step for a small business will be to establish which legal business structure you want to adopt, because each structure has different tax consequences. You could either choose to set up as a sole trader – the simplest business to set up – or form a partnership, a limited liability partnership or a company. Each business type has different liabilities for business debts and costs. Do your own research or speak to your accountant. When the decision about what business structure you are going to employ is made, make contact with HMRC.
Tip 2 – Tax efficiency when you withdraw profits
There are tax-efficient ways of reaping the benefits of what your business earns, and one of your priorities will be identifying the most tax-efficient way of enjoying your business’s profits. You might want to consider dividends, for example, or tax-efficient pension contributions. In addition, incentivising employees – which is important to any business – should involve looking at how best to use the profit your business accrues. Consider benefits in kind (perks) like private medical insurance, loans and company cars, because some of these won’t be taxed. Do some research into the most tax-efficient ways of rewarding your employees.
Tip 3 – Tax credits for childcare
If you are paying for childcare during your work hours and you have a small business, this is an expense for which you may be entitled to child tax credits.
Tip 4 – Reclaiming Cost of Asset Purchases
If you make a business purchase, i.e. you buy something that is vital to the setup and running of your business, then you can claim the expense against your tax. The cost of expenditure on assets can often be reclaimed from HMRC under their capital allowance schemes. HMRC developed these schemes because they wanted to encourage businesses to invest in assets.
Tip 5 – Research and development relief
You might be entitled to research and development relief if you are a company that pays corporation tax. It is worth making contact with HMRC or looking at their website to ascertain whether your company is eligible.
Tip 6 – Find a decent accountant
For a business just starting up, or a self-employed freelancer, finding a decent accountant to steer you in the right direction can be hugely advantageous. A qualified tax accountant can advise you further on all of the above and their job is to help minimise your tax liabilities and make sure you are paying the right amount. It really makes a lot of sense to get a professional involved as they can often save you more tax than they cost.
For more information, visit HMRC’s website or take a look at all the helpful advice on Tax Donut’s website.
If you are a start up business and you are looking for office space, contact Send Business Centre on 01483 225617.
