Reduce Corporation Tax

A Guide Based on Key Ways to Reduce Corporation Tax!

20/05/2022Tax Issues , Tax Saving Tips , Taxation

If a business owner aims to find key ways to reduce corporation tax, he can find more than 100 ways to do so. The will of reducing the taxes will help find a way. In this comprehensive guide, the smart and easy keyways are narrowed down for you which will be really helpful.

Especially in the case of owners who carry out small businesses, there are multiple options to do so. If you are in the UK and associated with the business world the chances of reducing your taxes are even higher. There is no need to panic as according to research there are actually 32 ways to reduce the tax with the owners who carry out small businesses.

Let’s discuss the most prominent keyways here to make the deadly tax year-end a little relaxing.

 

Pay Your Civil Partner or Spouse

In case you tend to pay your civil partner or your spouse for working without business as a salary. This will come under allowable expense and will save you from the tax bills. Consider the following ways to make it possible:

  • Your spouse or civil partner earns an amount that is less than the amount of income tax-free allowance. The process will be free of tax and the amount goes straight into their pockets.
  • This will help to grow family wealth and reduce taxes.

So get ready to treat your family to some family trips with this smart earned amount. Moreover, in the case of a family member having shares in the business, he can additionally get the tax-free amount of dividends. This way makes it possible to extract some amount from your limited company and pay no tax on it.

Furthermore, it is important o follow the right share structure for your business if you want to avail such benefits from the company.

 

Our young and qualified team of professionals can actually give easy solutions to your tax problems. So pick up the phone and reach out to us now for instant help. Call us on 02086868876 or email us today.

 

Gift Shares to Family

It is to be considered that while you decide to gift shares to any of your family members, there is the possibility of tax implications. However, this is still worth doing as you will definitely be in a win-win situation.

 

Employ Your Children

Several people who are even carrying out their own business are unaware of this option and the possibility. This is important to know that your child should be over the age of 13. Some conditions for the working hours have to be followed as well as the child has to practically do some work for your business.

Furthermore, a fair commercial rate can be given to the child. There can be a discussion on if you are paying your children, should it be a tac deductible amount or not.

 

Pension Contributions

For those who are tired of dealing with the high tax rates, this one is the best solution to go with. The contributions we make for pensions are normally free of tax.

 

Business and Personal Assets

Sometimes the businessmen use their own personal assets for the business. In order to reduce the tax liability and there is a possibility to make a claim. The example of such businesses where you are using your gadgets like laptop and mobile phone is considered as personal assets. You can make a claim for this personal asset.

 

Wrapping Up

Finally, the discussion of ways to reduce corporation tax can be summed up as the important information is well gathered and discussed in the guide. Dealing with taxation is often considered a complicated process, business-related individuals usually seek professional help to get rid of paying high amounts for tax bills.

We hope these few minutes of reading will further help to make smart and accurate choices to save your amount from paying taxes over the end of the financial year.

 

If you are looking for a helping hand to talk about taxation, we offer a one-hour free consultation. Call and discuss your requirements with us for an instant solution. 

 

Disclaimer: The information about ways to reduce corporation tax provided in this article is general in nature. It does not intend to disregard any professional advice.

 


Related post

can you pay corporation tax in instalments
Can You Pay Corporation Tax in Instalments?

11/12/2024corporation tax

Can you pay corporation tax in instalments? Whether you own a large or a small business, the profits you’re earning through your business come under corporation tax paid to HMRC in the UK. One of the primary responsibilities of the company director is to ensure that the records are accurately maintained and accounts are filed. This will allow reporting of accurate profits of a business to HMRC, leading to determining the right amount of tax. Sometimes, this procedure becomes more stressful once a director realises that the tax deadline cannot be met. If you find yourself in such a situation, don’t worry; we have got you covered. This guide will help you through the process of understanding what to do if you cannot pay your corporation tax bill on time and if can you pay corporation tax in instalments. Carry on reading to find more. Get in touch with our young, clever, and tech-driven professional accountants if you want to choose the best accounting services. Understanding Corporation Tax and Large Companies In simple words, the corporation tax is referred to as a corporate tax that all limited companies that are carrying out business activities in the UK pay to HMRC on their profitable earnings. The companies are required to get themselves registered with HMRC to give access to their earnings and profits so that the accurate tax bill can be determined. The director of a company knows that they got three months after the trading of business activities begin to get registered for the corporation tax. In case they do not get registered within this time limit, there can be legal consequences that a beginner in business will never want to face, along with other challenges. Mostly, the small businesses make the director obliged to ensure that all the corporation taxes are paid on time. However, in the case of large companies, there is normally an in-house team available to work on the finances and accounts. They ensure the tax payments along with seeing other financial and accountancy matters. Any of this does not matter if the businesses ensure that taxes are paid on the deadline. Moreover, only the limited companies that are generating profits are obliged to pay corporation tax on profitable amounts. However, if you are running the company on losses, you can inform HMRC, and the corporation tax will be exempted. In the case of sole traders, they are obliged to pay income tax on the earned profits from the business but not corporation tax. What If You Cannot Pay Corporation Tax? Sometimes, a business situation comes up that makes you unable to pay corporation tax anywhere near the deadline. The first and foremost thing to do in such a situation is to get in touch with HMRC to notify. HMRC is always available to listen to the concerns of the businesses that are struggling in the UK and making possible compromises, but you will have to be upfront with HMRC forts. If you ignore the reminders and tax bills from HMRC, your business can be in hot water and face consequences. There can be a time-to-pay deal by HMRC that will allow you to pay what you owe within a set period. This period is predetermined by HMRC in the UK. There will be a winding-up petition for your business if you fail to pay the corporation tax again. In case you are not being able to understand or handle the tough situation, you can get help from experts as well. Seek professional help to come out of this business situation. Can You Pay Corporation Tax in Instalments? In certain business situations where you need more time to gather your funds to clear your corporation taxes, you can ask HMRC, ‘Can you pay corporation tax in instalments?’ If the conditions are met, HMRC can offer you an instalment plan. This plan is normally known as the Time To Pay Arrangement or TTP. This will lead your business to settle the payments in instalments over an agreed period between HMRC and you. HMRC will look back into the history of your tax payments and paying debts to ensure that you’re worthy of getting this favour. If they are convinced that your business is in a position to make the repayments, there will be a TTP arrangement for your business.  However, there are certain conditions to qualify for this. You need to act swiftly before HMRC opts for the winding-up petition. Ensure that the TTP arrangement is submitted in written form. This should accompanied by supporting documents that can prove that you are incapable of paying corporation tax in one-time payments and that you can also manage the instalments. You need to be very mindful when deciding on your corporation tax instalments because the consequences will be even worse if you fail to pay the instalments of your corporation tax. What are the Penalties on Instalments? If you’ve been granted the instalment favour by HMRC and fail to pay your corporation tax instalments, you’ll face penalties and interest on the overdue amount. When you miss an instalment payment, you’ll receive an initial penalty of a certain percentage of the overdue amount. If you still haven’t paid the overdue amount, you’ll start receiving daily penalties. HMRC charges interest on overdue amounts. Interest accrues daily on the overdue amount, starting from the original due date. If you’ve made a serious default, such as deliberately withholding payment or providing false information, you may face an additional penalty. In case you’re struggling to make payments, contact HMRC as soon as possible to discuss your options. Ensure you make your instalment payments on time to avoid penalties and interest. Consult with a tax advisor or accountant to ensure you’re meeting your corporation tax obligations and taking advantage of available tax reliefs. Verify the details on the penalty notice, including the amount and due date. Pay the penalty amount by the due date to avoid further interest and penalties. If you disagree with …

Read more
Tax E-News – Budget Special
Tax E-News – Budget Special

16/03/2023Tax News and Tips

On 15 March 2023, Chancellor Jeremy Hunt presented his first Budget to Parliament and set out a plan to reduce inflation, grow the economy and get government debt falling all whilst avoiding a recession and tackling labour shortages. Below we set out some of the main points.   Cost Of Living Support Energy Costs The Energy Price Guarantee (EPG) brings a typical household energy bill in Great Britain down to around £2,500 per year. It has now been announced that the £2,500 EPG will be extended by 3 months to 30th June 2023, before increasing to £3,000 until the end of the EPG period on 31 March 2024. This extra 3 months at £2,500 will be worth £160 for a typical household. In Northern Ireland, a similar scheme operates, reducing typical household energy bills to around £2,109 per year. This has also been extended at the same rate until 30th June 2023. A new scheme for businesses, charities and the public sector has been confirmed. The Business Energy Bills Discount Scheme will run until 31 March 2024, giving non-domestic customers discounts on their gas and electricity bills. Childcare Additional support is being provided towards childcare costs in what the government describe as a ‘childcare revolution’. This includes 30 hours of free childcare for every child over the age of 9 months, with support being phased in until every eligible working parent of under 5s gets this support by September 2025. For Universal Credit claimants, the government will also pay childcare costs in advance rather than arrears, when parents move into work or increase their hours. The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children, an increase of around 50%. Benefits and State Pension As confirmed at Autumn Statement 2022, the government will also increase benefits, including the State Pension, paid to recipients in the tax year to 5 April 2024 by 10.1%. This increase in the State Pension means that most pensioners will receive £10,600 in 2023/24, where they have 35 qualifying years. Individuals are being urged to check their contribution record on their Government Gateway account and consider making Class 3 voluntary National Insurance (NI) contributions in respect of missing qualifying years. Normally it is only possible to make voluntary NI contributions for the past 6 tax years, but until 31 July 2023, it is possible to go back as far as 6 April 2006 and pay additional contributions at the 2022/23 Class 3 rate of £15.85 per week. In-year Class 3 contributions for 2023/24 will increase to £17.45 per week.   Income Tax Increasing liabilities The personal allowance and basic rate band threshold are now frozen in place until 5 April 2028. As earnings increase, individuals will move into higher tax bands. This is often referred to as ‘fiscal drag’ because it will raise more tax without the government increasing income tax rates. The personal allowance continues to be partially and then fully withdrawn for higher earners, with £1 of personal allowance lost for every £2 of adjusted net income over £100,000.   Summary table of key income tax rates and allowances for the tax year to 5 April 2024 (2023/24) Band Taxable Income Tax rate in 2023/24 Other income Savings income Dividend income Personal allowance Up to £12,570 0% 0% 0% Basic rate £12,571 – £50,270 20% 20% 8.75% Higher rate £50,271 – £125,140 40% 40% 33.75% Additional rate Over £125,140 45% 45% 39.35% Other allowances Savings income continues to benefit from a personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Dividend income attracts a £1,000 dividend allowance in 2023/24, down from the £2,000 allowance seen in previous years. These allowances are in addition to the personal allowance and attract a 0% rate of income tax. Scotland Individuals living in Scotland and classed as Scottish taxpayers have a slightly different banding system for ‘other income’ (non-savings, non-dividend) as follows: Band Taxable Income Tax rate in 2023/24     Other income Personal allowance Up to £12,570 0% Starter rate £12,571 – £14,732 19% Basic rate £14,733 – £25,688 20% Intermediate rate £25,689 – £43,622 21% Higher rate £43,623 – £125,140 42% Top rate Over £125,140 47% The application of income tax to savings and dividends income is the same as for the rest of the UK. Pension tax relief There was good news in the Budget for those saving in a personal pension. The current pension lifetime allowance (LTA) charge is being abolished from 6 April 2023. The LTA has caused some high earners, particularly doctors, to retire early as tax charges apply on crystallisation of pension funds if the LTA (currently £1,073,100) is exceeded. Individuals may be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. This is currently capped at 25% of the LTA and going forwards, for most individuals, will remain capped at £268,275. Another pension limit increased by the Chancellor in the Budget was the pension Annual Allowance (AA) which increases from £40,000 to £60,000 from 6 April 2023. The AA applies to the combined pension input by the individual and, in the case of employees, their employer. Pension contributions in excess of the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the 3 previous tax years. For those with high incomes, the AA is tapered. From 6 April 2023, where a taxpayer’s adjusted income exceeds £260,000 (increasing from £240,000), the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000). The Money Purchase Annual Allowance (MPAA) replaces the AA when an individual starts to flexibly access a defined contribution pension scheme. The MPAA will increase from £4,000 to £10,000 on 6 April 2023. Note that an individual’s pension contributions can be very tax efficient depending on their level of income. The taxation rules …

Read more