Tax Advice For The Small Business

Gary Green
Gary Green
July 15, 2020

A lot of tax advice is aimed at large companies and multinational corporations. In today's article, we'll give our top tips for small businesses.

If you want expert tax advice personalised for your business, please get in touch. One of our experts will be happy to have a free, no obligation chat about what you're looking for.

Otherwise, here are our top tips on how to arrange your affairs in the most tax efficient way. For more details, check out the HMRC page on business tax.

Tax Free Benefits

Current tax law allows for a number of tax free benefits for your staff. Check with your accountant first, but you should consider:

  • One mobile phone per employee
  • Subsidised travel (including incentives to use bikes or share cars)
  • Staff parties and team-building (subject to a limit per person)
  • Health checks and sport/fitness subscriptions
  • Parking and/or use of car pools

Employ Your Family

As long as they are legitimately working for you (again, check with your accountant to make sure you are compliant) you can employ family members and take advantage of tax free bands.

If you pay them the same amount as the tax free band, they won't have to pay any income tax at all. You can also make use of their capital gains tax allowance.

We do stress, the salary must be sensible and must reflect the work carried out. You must pay the salary too! You can't just do it "on paper" so as to get a tax advantage. HMRC knows all the tricks so keep it above board.

Take Your Profits

There are a number of ways of taking money out of the business:

  1. Salary
  2. Dividends
  3. Director's Loan
  4. Reimbursement

1. If you choose to pay yourself a salary, make sure you are correctly registered with HMRC. You'll have to deduct the necessary tax and NI. But you will take advantage of the "personal allowance". This means you can draw a salary of this amount without having to pay any income tax.

2. If you run an incorporated company, some of the profits will go towards corporation tax. Anything left over can either stay in the company ("retained earnings") or come to you as dividends. It's usually more efficient to pay yourself dividends as the tax rate is lower than on salary.

3. Loans to and from the business are a little more complicated in terms of the accounting. They can be a useful way to solve liquidity issues (in either direction). But we would only recommend doing so with the advice of a professional accountant.

4. If you incur expenses "wholly and exclusively" for the purpose of doing business, you can claim them as a business cost. This has two advantages. You get the money back tax free. And you can set the cost against the business profits (for corporation tax purposes).

If you'd like to discuss any of the tax advice in this article, please get in touch. We would be happy to discuss your needs and make suggestions. And be sure to check our our case studies to learn how we work with businesses just like yours.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
Contact Form Demo (#1)
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
October 23, 2023
PAYE Investigations

Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog

September 29, 2023
London-based accountancy business acquired by Key Business Consultants

Exciting Merger Alert: London's Reed Taylor Benedict & Benedict Leff Accountants Acquired by Key Business Consultants.

September 18, 2023
Tax Tribunals – An Overview

Dive into the realm of Tax Tribunals: A comprehensive overview shedding light on this crucial aspect of taxation.

September 2, 2023
What Is A COP8?

Learn about COP8, a tax-related Code of Practice issued by HMRC for suspected tax avoidance cases. Discover when COP8s are used and the penalties associated with them.

August 20, 2023
HMRC Compliance Checks

Navigate the complexities of HMRC compliance checks confidently. Our comprehensive guide covers everything you need to know about handling tax inspections and more.

August 6, 2023
Tax Evasion and Tax Fraud

Untangling the complexities of tax evasion and fraud. Delve into our comprehensive guide to understand the differences, consequences, and preventive measures.

June 18, 2023
Which Jobs In The UK Have The Best Salary Growth Potential?

Explore the top UK jobs with the highest salary growth potential. Uncover promising career paths and industries that offer substantial earning potential.

May 23, 2023
How To File Dormant Accounts Through Companies House

Learn the step-by-step process of filing dormant accounts through Companies House with our comprehensive guide.

May 19, 2023
Customs Declaration Service (CDS) and VAT

Discover how the Customs Declaration Service (CDS) and VAT intertwine in this insightful blog article.

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
Newsletter Form (#2)
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2022 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram