Saving BusinessTax

One always has to be very aware that tax avoidance is a legal and proper means of minimizing your tax bill where as tax evasion is illegal and must be avoided. HMRC (Her Majesty's Revenue & Customs) have increasing powers and this is a very strong deterrent to ensure that one does not become involved in evasion.

There are many basic and in some way obvious ways that you can do that are both inexpensive and completely with in the law.

The first and most elementary one,but one,that we often see is not dealt with correcly is to keep a first class set of records and ensure that you record and claim for all the business expenses that you incur. If you do not you will undoubtedly be paying tax unnecessarily.

If you are just too busy running your business to keep your own books make sure that you simply file all your sales invoices, purchase invoices, expense vouchers and bank statements on lever arch files and regularly give these to your bookkeeper or accountant so they can keep your records up to date. It will be money well spent as it will ensure that you keep your records up to date and can meet your filing deadlines either as a sole trader or as a limited company. Also your year end accounting fees will be much lower if you have good records. The best news of all though will be that your tax bill will be lower as you will be claiming for all your business expenses.

Simple ideas like ensuring that you have a separate business bank account and deal with all you business income and expenses through that account is an easy idea to implement. That way you have one source of all your business transactions and you should open a business bank account as soon as you open for trade. We come across many clients who have not had such simple advice from their previous professional advisor so they have their personal and business transactions all mixed up. Not only does this make it difficult to claim the proper amount of expenses but it also means that your accountancy fees will be higher than they should be.

Some other points to consider is whether you should trade as a sole trader or through a Limited company as there advantages and disadvantages of either.

If your family work for you should consider making payments to them particularly if they have unused personal allowances.

If you are getting close to your accounting year end then you should consider if there is any legitimate expenditure that you can bring forward such as redecorating of your office or factory. Also it can be a good idea to purchase any new equipment before the end of the accounting year.

When you feel that the business is well established and you have long term plans to stay in the UK then it must be worth considering making contributions to a personal pension and the sooner you do the greater the ultimate pension pot will be.

It is very important however that you keep your eye firmly on the ball and make a profit as there is no point in thinking of saving tax if you do not have the profits to protect.


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The Author writes many articles on Income Tax and Pension Planning and for more information please go to PAYE Tax Refunds