If you’re considering setting up a limited company then you could be one of the 500,000 new limited company start ups the UK sees annually. This article provides the top tax saving tips for limited companies, some you may be aware of and others could come as a pleasant surprise!
Top tax saving tips
Before we look into the tax advantages for established limited companies, did you know that you could also claim for business start-up costs before your company was even formed? Any expenses incurred prior to trading, but that were essential to begin trading, can be reimbursed to you through your tax assessment. And this is just the beginning…
Tax savings on your income from the company
As a director of your own limited company you have control of your own income and how that is to be extracted from your company. This means that you can decide your salary and dividends in order to be able to take a greater advantage of a more financially generous tax rate.
Pension contributions and tax savings
Your limited company is able to contribute into a pension fund for you which could save on corporation tax at the same time, so you’re saving for your future whilst also making savings today.
Expenses and VAT
Another way to reduce corporation tax is to claim back your business expenses. Any financial outlay your company has made that has been essential to the running of your business can be returned to you at the end of the financial year. This can include anything from machinery and vehicles to utility bills.
Savings for home work
If you’re a contractor who occasionally works from home then you can claim up to £6 weekly from HMRC – more so if you have a dedicated office within your home.
Whether it be a bonding activity, summer barbecue or Christmas party, you are entitled to claim £150 per employee, per year for annual company event costs. In addition to this, you could also claim a further £150 per employees partner, so a nice saving of £300 per couple.
If your mobile phone is used for work purposes and the phone contract is in the company name then 100% of the bill can be claimed back.
As long as you’re considered a ‘small business’, you will be able to make a claim for Employers National Insurance contributions of upto £4,000 annually.
Yearly investment allowance
If you wish to invest in your company; whether it be equipment upgrades, technology outlays, security systems or property extensions, to name but a few, if the asset is for business use and it is the business accounts that have made the outlay then the full costs can be offset against company profits. This will reduce the corporation tax for that year and this can also be done annually.
You are entitled to the same employment benefits as anyone else, if you are an employee of your limited company. This could mean; holiday pay, sick pay, maternity pay and help with childcare costs.
You are allowed to claim for incidental overnight expenses if you have had to travel for business, currently the rates are £5 per night in the UK and £10 per overnight stay abroad.
Training and development
If you want to expand your knowledge you will find that most of the related costs, such as tuition fees are tax-deductible. They will have to be considered job-related.