When it comes to the tax for small businesses and startups, the area is quite tricky. In fact, it can be quite a daunting situation for the credulous.
However, if you take some time out from your busy schedule and spend some time with your accountant, you will surely find some ways in which you can save some tax. Here are 8 best tax saving tips for the business owners and startups.
Get Familiar With Your Industry
First and foremost, it is imperative that you keep communicating with your association and trade body, be a part of their events, and keep reading the newsletters.
Most industries will have their own particular dispensation and allowance which has the approval of HMRC for instance – uniform allowances. Your trade body or union will favour you and you should make the most of it.
Concentrate More On Your Business
Do you really think you are the right person for filing VAT returns or bookkeeping? If you are giving time to your business, then you will surely earn profit out of it, whilst allowing the accountants and the bookkeepers do what their responsibilities and tasks are.
You might be thinking you are saving money in fees but in a real sense, you are losing out if you are not claiming what you are entitled to.
Have A Discussion With Your Accountant
Now and then business owners keep on grumbling to their accountants and how they have to bear the burden of paying too much tax.
The actual truth is that these business owners trust their accounts and think they are the real advisors, but little did they know that actually, they are the ones who are paying as little tax as possible. If you don’t talk to your account, it is better to have a new one instead.
Know Your VAT
One of the major areas where the business owners are losing out is VAT. Ask yourself whether you are paying the right amount and are you familiar with the Flat Rate Scheme?
It has been seen that most of the business owners are not familiar with the Flat Rate VAT scheme, not knowing the fact that it is beneficial for their business and it is a valuable source of profit. In simple words, as per flat rate scheme, you are just paying a flat rate of VAT on your turnover.
HMRC has the list of the flat VAT rates for varied industries. For instance – for computer and IT consultants the flat VAT rate is 14.5%, for Estate agents it is 12%.
If you want to know more about the flat VAT rate, you can dial HMRC contact number. It is not feasible to reclaim the VAT on your purchases but you can have the difference between the VAT you charge your customers i.e. 20%.
Work From Home
For the self-employed businesses that spend their valuable time working from home, HMRC will offer them tax savings. Most of the businesses make a claim of modest use of the home charge of mere £2 per week but HMRC offers you more than that.
All the sole traders working from home, HMRC will be allocating a much more advanced method for the calculation of what expenses can be deducted for the use of your home.
In the event you are a self-employed business owner, you are allowed to make a claim for a proportion of the following home costs – heat & light, mortgage interest, landline & phone costs, insurance, council tax, general household repairs and maintenance.
For all those businesses using a dedicated room in the house for work, the use of home claim can be quite munificent.
Have A Good Team
Even a sole trader can also have a team to call on. It is important for you to have an accountant whom you can trust along with a capable financial advisor.
At times, the financial advice is confused with the advice an accountant should ideally offer, but make sure you know that two cannot be the same. Make sure you have the right advice related to the investments and that can help save tax as well.
Even if you are not in the favour of doing the bookkeeping on your own, you can ensure that you have claimed for everything you are entitled to and this can be done by keeping the copies of everything.
Seeing the failure in keeping the correct documentation in support of the businesses, HMRC has disallowed expense claims or input VAT amounts. Make sure you have saved yourself from falling into this trap.
Pay Yourself Efficiently
The amount you pay yourself from the business turnover has a major impact on the amount of tax that you will be paying. Dividends, salaries, benefits in kind, all require consideration on an on-going basis.
One of the common benefits in kind is using the company car. Make sure HMRC is being informed immediately when the employee receives the company car. This will help you in saving tax bill at the year end. Dividend payments should be monitored on a monthly basis and this can be done by keeping the records up to date.