When entrepreneurs think of their business, they think of grand strategies and bold ideas. Nobody ever thinks of tax compliance as an avenue to success, but it is essential for the survival and longevity of every enterprise. After all, if you fail to pay your taxes, you could get shut down.
However, there is such a thing as paying too much in taxes. There are plenty of expenses you can deduct from your taxes. Doing so can increase revenues and improve profit margins. To help you optimize your tax strategy, we have created this list of legal ways you can lower your taxes. With no further ado, here they are.
1 – Register for VAT
Registering for VAT is critical if your clients are other businesses. It also helps if you make a lot of purchases. You can shave a whopping 20% off on your expenses, which is totally worth the quarterly VAT return you have to submit every quarter.
While this might seem tedious, you can hire an accountant to do the job for you. They can also set you up with hassle-free accounting software (like Xero, Quickbooks, and FreeAgent) that can make your bookkeeping more efficient.
2 – Register for a lower tax jurisdiction
If you operate internationally, you might be able to qualify to apply for taxation in jurisdictions with lower taxes. It all depends on your center of operations and the structure of your business.
In sole proprietorships, you will have to pay taxes in places you are a resident. In other cases, different rules apply.
If a good percentage of your work is done abroad, you might be able to apply to that jurisdiction. If your business is online and operates internationally, you might also be able to apply in a different jurisdiction. The lowered corporate taxes might save you a lot of money in the long run.
However, this is a complex route that should never be taken without the guidance of an accountant.
3 – Give money to your kids
Using a discretionary trust funded officially by your company, you might be able to pay your children an earning allowance of £11,500 per year with no taxes. While this might seem less than legal, it is fully possible to enact this strategy so long as you follow the expert advice of an accountant.
The trust should be set up to use the income for your children’s benefit, such as school fees and other expenses. That way, you would be able to draw from the trust instead of your own earnings after you’ve been taxed.
There is more to tax compliance than paying it. There are plenty of legitimate strategies you can take to reduce the amount that ends up in government coffers. These avenues are fully within your legal rights as an entrepreneur. As such, you must consider every possible avenue to reduce your expenses and heighten your profits.
All of these options would be more available to you if you have an accountant on your side. After all, they have the expert knowledge that can allow you to navigate the UK’s tax regulations legally and skillfully.
Call the accountants at Cruse Burke now for your quote. Tell us about your business so that we can create an optimized accounting and tax strategy that gives you greater financial freedom.