Tax saving tips to maximise your start-up’s potential
When you’re first starting out in business, it’s essential that you focus as much of your energy as possible on maximising your start-up’s potential. Your time is valuable, and there are better places to spend it than on time-consuming tax issues.
This is why hiring a specialist tax accountant from Tax Agility is so important – we can ensure you’re saving as much money and time as possible, and we also provide you with valuable business information gained from years of experience. Here are some tax-saving tips you can apply to your business.
Know your industry
Knowing your industry inside out is not just good for business, it can also save you money on your taxes. If you keep yourself engaged in what’s going on in your industry, you’ll be the first to know of any new reliefs or allowances approved by HM Revenue and Customs (HMRC). For example, if you’re in the construction industry, knowing how the Construction Industry Scheme (CIS) works is beneficial. If in doubt, check with an accountant specialises in your industry.
Check if you’re eligible for Seed Enterprise Investment Scheme (SEIS)
SEIS is a scheme that offers tax relief to those individual investors that buy shares in new companies. Though you’ll have to give a small chunk of your start-up away in exchange for their investment(s), it can’t hurt to check if you’re eligible. You can receive up to £150,000 of tax-free investment, but unless your company follows the rules laid out on the government web page your investors will not be able to claim the tax relief.
Choose the right business structure
You can start saving on your tax bill in the first month of your start-up’s life if you choose a business structure that’s appropriate to your start-up. Certain structures can allow you to adjust your earnings to avoid certain taxes – for example, if you set yourself up as the director of a limited company, then you can pay yourself in dividends, which you do not have to pay National Insurance Contributions on.
The Making Tax Digital (MTD) scheme is also fast approaching. From 1 April 2019, VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 are required to use the MTD service to keep records digitally, plus also use software to submit their VAT returns from 1 April 2019. If you haven’t made the switch and chosen a system that can integrate with online accounting easily, then it’s time to talk to an accountant with experience in cloud accounting to find out more.
Work from home
One way to maximise your start-up’s potential when you’re just starting out is to work from home, as you can save money on expensive office rental fees. At the moment, HMRC allows you to claim £4 a week to cover fixed expenses. In addition, you can also claim tax relief for other expenses like telephone calls and electricity for your work area. However, it must be said that you cannot claim things that are used for both private and business, such as rent or broadband access. To find out more about how much household expenses can be reimbursed, visit this EIM01476 page.
Hire an accountant
It can be tempting to try and save money by doing your taxes yourself. However tax laws are complex, and you need a professional to ensure you’re saving as much as possible, within the permitted law. The sooner you hire an accountant, the sooner they can get to work ensuring you’ll only be paying the tax you’re liable to pay.
Chartered accountants for small businesses
At Tax Agility, we are chartered accountants for small businesses including start-ups. One area we specialise in is business tax for small businesses, where we can show you which tax reliefs you can apply for and any expenses you can claim, potentially saving you thousands of pounds worth of tax.
If you’d like to know more about tax saving tips for your start-ups or small business, contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
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What tax exemptions apply for Christmas gifts, bonuses, and parties?
Christmas is just around the corner, which means it’s time for an annual refresher on the tax exemptions surrounding Christmas gifts, bonuses, and office Christmas parties.
Though these rules apply to all businesses, in this article we are going to focus on how small and medium-sized enterprise (SME) owners should think about these employee benefits in order to maximise the value (and fun) for your employees. Here’s what you need to know to keep your tax liabilities to a minimum.
Christmas gifts
You do not pay tax on Christmas gifts that are considered to be ‘trivial benefits’. In order to be a trivial benefit, a benefit must cost £50 or less and cannot be a reward for their work or performance. It also cannot be cash or a cash voucher.
Gifts that are not trivial are taxed under Class 1A National Insurance, and if the gift can be resold or exchanged for cash then it may be taxed as earnings.
Please note that if your company provides trivial benefits as part of a salary sacrifice arrangement, then you will report it on form P11D on the salary given up and the worth of the trivial benefits. These rules apply to arrangements made after 6 April 2017.
If you’re a director of a ‘close’ company, meaning a limited company run by five or fewer shareholders, then you cannot receive trivial benefits worth more than £300 in a tax year.
Christmas bonuses
Cash bonuses are always going to be taxed, regardless of their size. Any cash gift you give to an employee will count towards their standard earnings and will be taxable under PAYE tax and Class 1 National Insurance Contributions, along with their other earnings.
You may also give tangible and intangible items to your employees as a Christmas bonus, but you will need to declare it on your end-of-year tax form (form P11D) and pay class 1A National Insurance Contributions on the value of the benefit.
Christmas parties
In order to ensure you keep your tax liabilities to a minimum when hosting a Christmas party for your employees, you’ll need to keep in mind:
- The party must be an annual event, not just a rare occurrence.
- The total cost of all parties you host in a given tax year must not exceed £150 per head, including VAT.
- You can either allocate £150 per head for a grand Christmas party or split the amount across a few parties in a given tax year.
- The amount £150 per head can include food & drink, travel expense, and other party-related items.
- If your annual parties do exceed £150 per head, your employees will have to pay tax on the entire amount, not just the value over £150.
- You must invite every employee working for your business or, for a larger SME, every employee working at a particular location.
Experienced tax accountants
Tax is a complex issue but as professional tax accounts, we’re here to help and provide the most tax efficient way to run your business, from Christmas party allowance to taking the money out of your small business, among other tax-related issues.
Contact us today on 020 8108 0090, or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
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- Tax guide for Christmas parties and Christmas gifts
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