10 free tax tips

Helpful tax advice for SME's

At Woods Russell Accountancy, Business and Tax Specialists we are always being asked by smaller business how to minimise tax bills and boost business profitability. Below we list 10 of the most simple and effective ways to do this in your business.

  1. Recording all allowable business expenses accurately: This may seem simple but it is by far the most common mistake small business make. If you do not have an accurate record of your business expenses, then you cannot claim for the tax deduction. In the age of cloud computing there are many hi tech solutions for record keeping, but a simple spreadsheet will often do the trick! If you are unsure whether an expense is claimable or not, don’t just leave it out but record it then speak to your accountant. This will ensure you maximise your tax deductible expenses
  2. Move your mobile phone into the company name: You are allowed to have one mobile phone per employee and that includes directors. If you are a director of a Limited Company make sure one of your phone bills is in the company name and this will be a fully deductible expense
  3. Make use of the new £1,000 allowance on savings: If you are a director of an owner managed company it is likely that you have a large balance owed to you from the company from when you invested the initial start-up capital to get the business going. This balance owed to you may just be sitting there, but you should get it working for you! By following the correct procedure interest can be charged to the company on this balance, reducing the company profits and increasing the amount you can withdraw from the company, it’s a win win!
  4. Pay into a pension: Paying into a pension is an effective way of reducing the company profits and getting a tax deduction while topping up your pension pot. If you are a basic rate tax payer you may miss out on the tax breaks available, but if the company pays into your pension then the reduction of profit is guaranteed
  5. Timing of large asset purchases: It is good to remind yourself of your accounting year end. If you are planning a big asset purchase you do not want to miss the year end cut off as this will mean you may have to wait another whole year to get the tax deduction
  6. Draw money correctly out of your company: By making the correct use of salary, dividends and interest on your director’s loan you may be able to take tens of thousands of pounds out of your company tax free, perhaps even more! You will need professional assistance tailored to your personal circumstance to get this right so speak to your accountant
  7. Make full use of the dividend allowance: The way dividends are being taxed is changing, now only the first £5,000 of dividends are tax free. This means you should make sure you are making full use of this allowance
  8. Use of home as an office: The tax man allows a no-questions asked claim of £4 per week if you use your home regularly for work. If you do work from home, make sure this claim is in your accounts! There may also be ways to increase this claim but you should speak to your accountant or tax advisor on how to do this correctly
  9. Check your tax code: Many people pay too much tax simply because their tax code is wrong. HMRC is getting better at explaining how tax codes are calculated but if you are unsure whether yours is right please seek help or contact us for advice
  10. Get a decent accountant and/or tax advisor: We have saved the best until last! Owners of small companies are often obsessed about reducing their accountancy fees, but this logic is counterproductive because by reducing the quality of tax advice you increase the tax you have to pay through poor levels of service. Investing in a good accountant will ensure your business is maximising profits and minimising tax while overall increasing efficiency

All information given above is intended for either small owner managed business or sole traders in general and may not be applicable to your individual circumstances. Please speak to your accountant or tax advisor before relying or using any of this information. Woods Russell Limited accepts no responsibility for this blog or to any third party who may use or rely on the information contained within it. All information was correct at the date of publishing

Matthew Russell