Running a limited company involves juggling numerous responsibilities, not least ensuring your business is tax-efficient. Navigating the complexities of the tax system can seem daunting, but with the right strategies and the help of a knowledgeable partner, you can maximise your savings and retain more of your hard-earned profits. As the Olympics have just started, here are five quick tax wins for limited company directors and shareholders to consider.
1. Optimise Your Salary and Dividends Mix
Balancing your salary and dividends is one of the most effective tax strategies for limited company directors. Dividends are typically taxed at a lower rate than salaries, making them a tax-efficient way to extract profits from your company. However, it's crucial to pay yourself a reasonable salary to take advantage of personal allowances and National Insurance thresholds.
Actionable Tip: Work with Accountr to determine the optimal mix of salary and dividends, ensuring compliance with HMRC regulations while maximising your tax savings.
2. Utilise Pension Contributions
Making pension contributions through your company can be a highly effective tax-saving strategy. Employer contributions to a pension scheme are considered an allowable business expense, reducing your company’s Corporation Tax bill. Additionally, pension contributions are not subject to National Insurance, providing further savings.
Actionable Tip: Regularly consult with a financial advisor to make strategic pension contributions as part of your remuneration package, ensuring these contributions are tax-efficient and aligned with your long-term financial goals.
3. Make Use of Partners Tax Bands
If you're partner pays tax in a lower tax bracket than you, it may be worth utilising some of their tax brackets. Utilising either salary or dividends, it can make a lot of sense to bring another person into the tax planning mix.
Actionable Tip: Work with Accountr to understand the pros and cons in your particular scenario.
4. Take Advantage of the Annual Investment Allowance (AIA)
The Annual Investment Allowance (AIA) allows your company to deduct the full value of qualifying business investments from your profits before tax. This can include expenses on machinery, equipment, and certain fixtures. Maximising the AIA can significantly reduce your taxable profits.
Actionable Tip: Plan your capital investments with us to make the most of the AIA. Keep detailed records of all qualifying expenses to ensure accurate claims.
5. Claim Business Expenses
As a limited company director, you can claim a wide range of business expenses, reducing your Corporation Tax liability. These can include office costs, travel expenses, and even a portion of your home expenses if you work from home. Keeping thorough records and receipts is essential to substantiate your claims.
Actionable Tip: Regularly review your business expenses to ensure you’re claiming everything you’re entitled to. Use accounting software to track expenses efficiently and identify any missed opportunities.
By implementing these five quick tax wins limited company directors and shareholders can significantly improve their tax efficiency and retain more of their profits.
If you need help considering these, and any other tax wins further, get in touch with Accountr today.
