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Top Ten Tax Tips: Entrepreneurs and Owner Managed Businesses

Let’s face it – the majority of us would be happy to pay slightly less tax, although we all recognise the importance of taxation. Without it we wouldn’t have the infrastructure and services in the UK upon which we rely.

Our Tax Partner – Jason McLaughlin – has compiled a brief guide to help you reduce your tax bill:

1. Look at the most efficient tax structure, whether that is sole trader, partnership, Limited Company or Limited Liability Partnership. If operating via a Limited Company, ensure correct allocation of salary and dividends to suit your situation. Make sure you take professional advice to maximise your individual circumstances.

2. Maximise tax reliefs and allowances. Ensure both spouses Income Tax and Capital Gains Tax allowances and lower rate tax bands are utilised in full. This may be achieved via profit or share allocation in the correct structure. Review availability of tax credits and use of tax free payments, such as childcare vouchers.

3. Take advantage of the current capital allowances regime ensuring, where possible, the use of the advantageous 100% Annual Investment Allowance, particularly as it currently allows for up to £100,000 of expenditure to qualify and from April 2012 this will reduce to £25,000.

4. If you are VAT registered, review if the flat rate scheme may be more advantageous. Depending on your sector, even with the increase in the VAT rate to 20%, some considerable savings can be achieved.

5. Include review of pension provisions in any profit extraction review to take advantage of the generous tax reliefs available. Up to £50,000 may be contributed on which tax relief is given of your highest marginal rate.

6. Look at the most tax efficient options for company vehicles either owning in the business or claiming the authorised mileage rates. Here the key is looking at low CO2 emission vehicles as they are very tax effective.

7. Make sure you consider items bought prior to starting the business are accounted for, including computers, furniture, mobile phones, etc. Introduce on the day you start at their market value.

8. When claiming use of home as office, ensure you make the maximum tax deductable claim possible. There are different ways to calculate from a flat weekly rate to a percentage of all running costs, including mortgage interest.

9. Keep accurate records and claim all related costs and make sure the bills are in the appropriate names. This keeps the paperwork simple and you can get the right relief.

10. Make sure you keep up to date with HM Revenue & Customs by filing on time and, if you are experiencing difficulties meeting your tax liabilities, contact the business payment support service as early as possible so that you can agree revised terms.

During these strained financial times every penny really does count, so if you’d like more information about reducing the burden of your tax bill, give Jason a call on 0845 680 7800.