You are entitled to plan your tax affairs in a way that makes sure you do not pay more tax than you have to. There are many legitimate ways in which you can save tax, or example by saving in a tax-free ISA (Individual Savings Account), making donations to charity through Gift Aid, claiming capital allowances on assets used in your business or paying into a pension scheme.
Here are 10 ways to pay less tax:
- Choose the right business structure for your business – most businesses start out as sole traders but once they start making profits convert to limited companies, this is because sole traders pay income tax starting at 20% and national insurance class 2, £2.70 per week and class 4, 9% on profits between £7,755 and £41,450, whereas, in a company a you could pay the tax and NI free salary of £7,748 and then pay dividends from profits after corporation tax of 20%
- Employ your family – Children can legally work from the age of 13 which means they can perform activities which are relevant and justifiable in your business. Each member of your family has a tax free allowance of £9,440 (2013/14).
- Avoid earning more than £100,000 – Once you earn over £100,000 you start to lose your personal allowance, when earnings are above £118,880 all of your allowance of £9,440 will have been lost
- Pay into your Pension – Currently you can pay £50,000 per year into to your pension
- Pay Dividends – Generally directors will take a low directors fee and the rest of their income in Dividends
- Claim Expenses – You may well have an office at home and use your car for business
- Use Company Assets – Sometime the Benefit in Kind Tax works in your favour, so you could get the business to buy the assets for you to use for example a commercial vehicle or computer equipment
- Buy Assets – You should be able to buy assets with a loan or on credit but you will get the tax relief as soon as you take ownership
- Check for Building Assets – do have integral building assets
- R&D – Could you claim R&D tax credits