It's all about paying less tax

This is where we add value!

There are a number of possible conversations we might have on tax planning:

To incorporate or to be a sole trader

• There are significant tax advantages to incorporating, and the savings in tax more than outweigh our extra costs.
• However, some choose to stay as sole traders because:
  1. It is early days, and they want to see how things go before taking on the extra administration and cost.
  2. The extra administration required by the directors.

How to minimise the corporation tax paid

• Move your mobile phone contact into the name of your company.
• Use your company to contribute to childcare costs.
• Make pension contributions direct from your company to your pension scheme.
• Claim as expenses a reasonable proportion of your home costs if your office is at home.

How the affairs of the company dovetail with your individual affairs

• If you have income from other sources, you may wish to manage the income you get from the company to pay as little tax as possible.
• For example, we regularly advise clients who wish to manage income from their companies such that they have no personal tax liability.

The best structure for getting earnings out of your company

• £7,020 annual salary from 6 April 2011. This is the highest salary you can draw without becoming liable for National Insurance. If you are liable for National Insurance, the company will need to register for payroll, bringing increased administration expense and hassle. Don't draw more salary unless there are specific reasons to do so.
• Pay the remaining drawings as dividends. There is no restriction on the number of dividends you can draw in any year, and although the company will pay corporation tax, you will pay less income tax as a result.
• Reclaim expenses, including business miles at 45p per mile
• If you are a higher rate tax payer, don't forget to reclaim business expenses from the company, even if they are not allowable for tax (EG: entertaining). Although the company may not get tax relief, the repayment of the expense is still a tax efficient way of getting funds out of the company and into your personal account.

Opportunities to save on tax in the company

• Keep surplus cash in a company bank account. This works well as an alternative to taking the cash out and saving it in a personal account.