A record breaking 581,173 businesses were registered with Companies House in 2014 showing an accelerated increase on previous years with 526,447 and 484,224 recorded in 2013 and 2012 respectively.
In 2014 the UK had the fastest growth in Self Employed workers in Western Europe!
So what should start ups do 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 more tax than company structures
- Choose the best VAT Scheme you might be better off with Flat Rate or Cash Accounting
- Get an Accountant and use accounting software – the penalties and fines for getting your tax wrong can be huge!
- 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 £10,600 (2015/16).
- Avoid earning more than £100,000 – For all ages, the personal allowance reduces where taxable income is above £100,000 – by £1 for every £2 of income above this limit, so that the personal allowance is lost once taxable income exceeds £121,200 (2015/16).
- Pay into your Pension – Currently you can pay £40,000 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