Our top ten tax planning tips

Running your own business can be costly especially when there’s lots of taxes to consider (read our previous blog on taxes here: http://chw-accounting.co.uk/a-start-ups-simple-guide-to-tax/).

 

  1. Claim the ‘marriage allowance’

The marriage allowance allows you to transfer up to 10% of your tax free personal allowance (£1,150) to your spouse or civil partner. The lowest earner must have income of less than £11,500 for 2017/18.

 

  1. Personal allowance and basic rate band

Make the most of your personal allowance of £11,500 and basic rate tax limit of £33,500 in 2017/2018. If you’re married/ in a civil partnership it may be possible to transfer income-generating assets. For example, the transfer of rental properties to a spouse could enable lower tax brackets. However, it’s important to consider its impact on any other clauses/ taxes when doing so.

 

  1. CGT annual exemption

Under the annual exemption (£11,300 in 2017/18) capital gains are tax free. If you’ve already used up your annual exemption, you may wish to consider deferring disposals until the following tax year. Owning joint assets with your spouse also ensures exemption is used (assets can be transferred tax-free between spouses).

 

  1. Tax deductible expenses

Self-employed business owners can claim tax deductions for expenses incurred for the purpose of their business. This can include initial start-up and day to day running costs as well as salaries for employees including your spouse.

 

  1. Annual investment allowance

Currently the annual investment allowance for self-employed business owners provides a 100% tax deduction on the first £200,000 spent on eligible plant and machinery.

 

  1. Consider incorporating your business

From 1 April 2017, the corporation tax rate reduced to 19% (previously 20%) which is significantly lower than income tax rates which are up to 45%. Income tax either in the form of a salary or dividends must be paid when you take the money out of the company but if you don’t require the income you’ll have the opportunity to gain profit in a lower corporate tax environment.

 

  1. Dividend allowance

Recent changes to dividend allowance saw the introduction of a £5,000 tax free dividend allowance which could reduce to £2,000 by 2018. This allowance shouldn’t be overlooked, although there will be winners and losers from this scheme.

 

  1. Maximise your pension contributions

All business owners will or should contribute to a personal pension scheme. The current tax relief stands at 20%, meaning your provider will claim it on your behalf and add it to the pension pot. Higher taxpayers can claim tax relief on the extra 20% or 25% in their self-assessment tax return.

 

  1. Tax free ISA allowance

You can save up to £20,000 from April 1 2017 (previously £15,240) a year as tax free in an Individual Savings Account (ISA) It can be either saved as cash, shares or both.

 

  1. Tax return deadlines

Adhering to tax return deadlines can save you unnecessary fees. We understand it’s easy to let them slip during busy periods, however not meeting the 31 January (or the 31 October for paper) deadlines, is an instant £150 fine.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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