How to Save Money on Your Limited Company Taxes
As a limited company owner, you have a legal obligation to pay corporation tax on your profits. However, with the right planning and knowledge, you can reduce your tax liability and keep more money in your business. In this article, we’ll discuss some effective ways to save money on your limited company taxes.Claim Allowable Expenses
Claiming allowable expenses is a vital way to reduce your limited company taxes. Allowable expenses are those expenses that are incurred wholly and exclusively for business purposes. By claiming these expenses, you can reduce your taxable profits, which in turn reduces your tax liability. Some claimable expenses are as follows:- Travel expenses
- Office expenses
- Advertising and marketing expenses
- Staff salaries and benefits
- Business insurance
- Legal and professional fees
Choose the Right Accounting Method
Choosing the right accounting method is important for minimizing your limited company taxes. The two primary accounting methods are cash accounting and accrual accounting. Each method has its own advantages and disadvantages, and it is essential to choose the right method for your business.- Cash accounting is more straightforward but can lead to cash flow issues.
- Accrual accounting provides a more accurate picture of your financial position but can be more complex to manage.
Maximise Tax Reliefs and Allowances
Maximising tax reliefs and allowances is an effective way to reduce your limited company taxes. Tax reliefs and allowances are designed to encourage businesses to invest and innovate, and there are several ways that you can take advantage of these tax breaks to reduce your tax liability. These could be:- Claiming capital allowances for assets such as machinery, equipment, and vehicles.
- Annual investment allowance provides 100% tax relief on qualifying capital expenditure up to a certain limit.
- Research and development tax credits are available for companies that undertake innovative projects.
- Loss relief can be carried forward or back to offset against profits in other years.
Consider Employee Benefits
Considering employee benefits is an important way to reduce your limited company taxes. Providing tax-free benefits to your employees can help to attract and retain talent, and it can also reduce your employer national insurance contributions.- Tax-free benefits include pension contributions, childcare vouchers, and cycle-to-work schemes.
- Employer national insurance contributions are payable on most employee benefits.
- Salary sacrifice schemes allow employees to give up part of their salary in exchange for tax-free benefits.
Plan Ahead for Tax Payments
Planning ahead for tax payments is crucial for minimizing your limited company taxes. By understanding your tax obligations and deadlines, keeping accurate records, setting aside money for tax payments, and seeking professional advice, you can avoid penalties and interest charges and keep your tax liability under control.- Corporation tax is payable nine months and one day after your company’s financial year-end.
- Keeping accurate records will help you avoid under- or overestimating your tax liability.
- Setting aside money for tax payments will help you avoid cash flow problems.
- Seeking professional advice can help you understand your tax obligations and identify potential savings.
Should I Hire A Limited Company Accountant?
Our specialist team of expert and highly qualified limited company accountants are here to deliver everything you need to set up, operate and grow your business. Operating your own limited company is highly rewarding, but it can also be financially beneficial to undertake. However, amongst managing clients, staffing, organising premises and developing your service offering you will also have to deal with the daunting and difficult task of managing your company’s finances. Make running your business easier with MJ Kane & Co Accountants. Learn more about our Limited Company Accountants Service.Company Accounts FAQs
Q. What is the corporation tax rate for limited companies?
A. The corporation tax rate is currently 19% for all profits from April 2023Q. Can I claim expenses for a home office?
A. Yes, you can claim expenses for a home office if it’s used exclusively for business purposes.Q. What is the difference between cash accounting and accrual accounting?
A. Cash accounting records income and expenses when they are received or paid, while accrual accounting records income and expenses when they are earned or incurred, regardless of when they are actually received or paid.Q. Can I claim tax relief on capital expenditures?
A. Yes, you can claim capital allowances on qualifying assets, such as machinery, equipment, and vehicles.Q. What is the deadline for paying corporation tax?
A. Corporation tax is payable nine months and one day after your company’s financial year-end.Q. What is the difference between cash accounting and accrual accounting?
A. Cash accounting records income and expenses when they are received or paid, while accrual accounting records income and expenses when they are earned or incurred, regardless of when they are actually received or paid.Q. Can I claim tax relief on capital expenditures?
A. Yes, you can claim capital allowances on qualifying assets, such as machinery, equipment, and vehicles.Q. What is the deadline for paying corporation tax?
A. Corporation tax is payable nine months and one day after your company’s financial year-end.Related Limited Company Blogs
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