Top Five Tax Saving Tips for a Limited Company
When you start a Limited Company, you nurture the business with the intention to get back finance you put into it. To be honest, you will want more than the amount you have invested. As this type of business structure allows you to save tax compared to other structures, your expectation becomes even higher. So, to help your company save some tax efficiently and increase your profits, we have collected five important tips for you.
The fact is dividends are not subjected to National Insurance Contributions (NICs) for Limited Company owners. This means a significant amount of tax is saved compared to the sole trader route, where NICs must be paid on all income.
As a Limited Company owner, you need to declare dividends properly with company law requirements when your company retains sufficient profits. If your dividends are declared illegally, you may be charged with penalties, so be very careful.
Delaying the drawing profits company profits especially if you have reached a higher rate threshold in the current year can help you tax. Hence, consider the timing of your dividend declaration.
Executive Pension Scheme
Can setting up an executive pension scheme help save tax? Oh, yes it can. So, set up the pension scheme and invest pre-tax income in the pension than investing post-tax income in a personal pension to save a good sum.
If your spouse does not have any source of income, splitting your shareholding with your spouse can help to use your spouse’s tax allowance. Try consulting an accountant
first before you consider this option as it can create an issue later on.
You can take advantage of expenses which are genuinely incurred for business duties. The expenses can be internet connection, home-working expenses, childcare vouchers, public transport, and mileage expenses and so on.
Flat Rate VAT Scheme
What makes your VAT accounting
simpler? A Flat Rate VAT Scheme does. Along with that, it also help you to pay overall less tax depending on the amount of VAT you charge and recover.
These tips can help you save some amount of tax. That is why you need to read them carefully and keep them in mind. Apart from that, you should also meet your statutory deadlines to avoid any penalties. And, mind you penalties can be large.
I hope this blog becomes useful to all the Limited Company owners trying to save their tax.