Top 10 ways to save tax for small businesses

  1. Potentially reduce your company annual National Insurance liability by up to £4,000 by claiming the National Insurance Allowance
  2. Claim the £6 per week use of home as office allowance if you are an employee who has to work from home
  3. If your business does any R and D it may be eligible for tax credits
  4. The temporary £1m level of the Annual Investment Allowance (AIA) has been extended to 31 March 2023. This is available to any business investing in qualifying capital allowances (eg: office equipment).
  5. If you are employed by your company and need a phone for business consider buying it through the company, and having the contract with the company. Recharging personal calls is very difficult under fixed tariffs.
  6. Consider different ways you can reduce your taxable income such as pension contributions and salary sacrifice schemes (eg: cycle to work) – these need to be considered carefully but there are options to make a big difference.
  7. Managing your family taxable income is critical – for example, if either you or your partner earns more than £50,000 a year before tax, you’ll have to pay back some (or all) of your Child Benefit in the form of extra Income Tax and complete a self assessment.
  8. Beware of settlement rules, for example if you gift shares to your child who is a minor then income from the shares over £100 pa is treated as your income for tax purposes.
  9. Beware if you gift shares with a value over the CGT limit currently £12,300 (21/22) then you may have to pay CGT, there are exceptions or you may be able to claim Gift Hold-Over Relief if you give away business assets (including certain shares) or sell them for less than they’re worth to help the buyer.
  10. Dividend tax rates are increasing by 1.25% from 6th April 2022 – Consider if you should take dividends before rates go up but be aware not to trigger a higher tax bracket as rates higher

Current Income Tax rates and bands

The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.

Income tax bands are different if you live in Scotland.

Band

Taxable income

Tax rate

Personal Allowance Up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £150,000 40%
Additional rate over £150,000 45%

You can also see the rates and bands without the Personal Allowance. You do not get a Personal Allowance on taxable income over £125,140.

Plan ahead to avoid the new Plastic packaging tax that takes effect from April 2022, levied on plastic packaging containing less than 30% recycled plastic, with the tax charged at a flat rate of £200 per tonne.

Contact us so we can help you make the right claim for you.

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