Business taxes are an unfortunate part of doing business. They come under many names, such as corporation taxes, but the reality is this is the government attempting to claim their slice of your pie. Do everything you can to reduce your business taxes and you can save thousands every year.
Let’s take a look at this complex issue.
Understand the Different Types of Tax Avoidance
Tax avoidance is a legal form of avoiding tax. This is about using the law to your advantage to reduce taxes. There’s nothing illegal about it and companies from Amazon all the way to smaller companies like themoneyhub.co.uk use it to reduce their bill.
Tax evasion, on the other hand, is illegal and we don’t condone it in any form. It’s a wilful attempt to get out of your obligations.
Do Your Own Taxes
Unless you have a particularly complex business structure, there’s little need to employ an expensive accountant to do your taxes. A quick look on the UK government’s website will show you what you need to declare and all the rules to do with filing your business taxes without the help of an accountant.
By all means, get an accountant to check your work, but don’t waste a large chunk of money getting them to do the whole thing for you.
Review What You Can Deduct
Business taxes are a tax on profits. If you can reduce your profits, you’re going to reduce what you pay. Your overall income is taxed using general income tax, where there are few tactics to reduce the amount you pay without illegal tax evasion.
Reducing your profits can come in the form of sending part of your money elsewhere as part of a loan or just investing in other projects. You can even deduct business meetings, lunches, and vehicle mileage.
Hire Out Instead of In
Rather than paying taxes on employing people, outsource your work to independent contractors. This also has the double benefit of making your taxes simpler to deal with because it’s a straight payment and the contractor has to manage their tax affairs alone.
This depends on your business’s situation. Sometimes the UK provides tax breaks for companies that decide to hire employees, so you may even save money by hiring someone on a full or part-time basis.
We can’t say this often enough. The tax authorities have little tolerance for companies that submit their taxes late. The good thing is in the UK you can pick when the start of your tax year is, so your deadline is the deadline you choose.
Expect big fines if you fail to file on-time. If you know you’re going to miss the deadline, though, tell HMRC as soon as you can. They’ll often make allowances for companies that are forward and upfront about their affairs.
Consider purchasing dedicated accounting software to manage your tax affairs. This will make things much simpler come the end of the year. Also, check out this small business accounting ‘cheat sheet‘. It will also negate the need to employ a professional accountant to sort out your affairs.