When it comes to business, taxes are one of the necessary evils. They are a requirement but can also be a significant expense, so finding ways to minimize the tax you must pay is always a good idea. If you’re a business owner in the United Kingdom, there are a few key ways you can save on your corporate taxes in a few easy ways. Here’s a look at five of them.
Make Use of Offshore Accounts
If you have money you’re not using immediately in your business, one way to save on taxes is to put it into an offshore account. The interest you earn on that money will not be taxed in the United Kingdom. This can be a great way to grow your business while keeping more money in your pocket.
For instance, if you have £100,000 in an offshore account with 5% interest, you’ll earn £5,000 in a year. If you put that same amount of money into a savings account in the UK, you’d only be able to keep £4,250 after taxes (assuming a tax rate of 50%).
So, by putting your money into an offshore account, you can save £750 in taxes yearly. This can add up to a significant amount of money over time, especially if you have a large sum of money saved. There are some restrictions on offshore accounts, so talk to a financial advisor or accountant before making any decisions.
Take Advantage of Capital Gains Tax Exemptions
Another way to save on taxes is to take advantage of capital gains tax exemptions. When you sell an asset for more than you paid, you’ll usually have to pay capital gains tax on the profit. However, there are certain situations where you may be exempt from that tax partially or fully, depending on the asset and how long you’ve owned the asset.
For example, if you sell an asset that you’ve held for more than 12 months, you may not have to pay any capital gains tax on the sale. Similarly, if you sell your primary residence, you may also be exempt from this tax. In other situations, you may be eligible for a partial exemption, so it’s worth talking to an accountant to see if you qualify.
Make Use of Capital Allowances
The Capital Allowances Act, which Her Majesty’s Revenue and Customs (HMRC) regulates, allows companies in the United Kingdom to deduct various costs. The corporation’s income before taxes can be reduced by some or all of the items’ worth when paying taxes.
Businesses have two capital allowances: the annual investment allowance (AIA) and the first-year allowance. Research and development (R&D) costs, patents, and business premises improvements are examples of capital allowances. You can also claim capital allowances for assets such as equipment required for business processes and vehicles such as cars, vans, trucks, etc.
To know more about how you can maximize your capital allowance benefits, you should consult with a trusted capital allowance specialist for business. They can give you more specific and accurate advice depending on your business’s individual needs.
Use Tax-free Investments
Some investments you can make won’t be subject to capital gains tax or income tax. These include ISAs and NISAs, which are both Individual Savings Accounts. With an ISA, you can save up to £20,000 per year without paying any interest or capital gains taxes. With a NISA, you can save up to £14,000 tax-free annually.
Other tax-free investments include life insurance policies, pensions, and annuities, to name a few. Talk to a financial advisor to see which options are good for you and provide the maximum benefit.
Don’t Miss Deadlines
One last way to save on taxes is to ensure you don’t miss any deadlines. If you’re supposed to file your taxes by April 1, and you don’t, you’ll be charged a late fee. The same goes for any other tax-related deadlines, such as paying your quarterly estimated taxes.
If you’re unsure when your deadlines are, you can check with HMRC or your accountant. They’ll be able to give you the exact date so that you can make sure you don’t miss it.
There are a variety of ways that you can save on taxes as a business in the UK. This article highlights some of the best methods, including taking advantage of capital gains tax exemptions, using capital allowances, and investing in tax-free options. Consult with a financial advisor or accountant to determine which strategies work best for your unique situation. By planning ahead and taking advantage of these tips, you can keep more money in your pocket while growing your business.
