We’ve posted recently about how you can extract additional value from your business. Today, we wanted to show you how our tax consultant at Gravitate Accounting, Tim, takes his own advice and the considerable savings he makes on his business tax.
Maximising your household income in a tax-efficient way is just one of the routes available to save tax. The way Tim goes about this has changed over the years to reflect his lifestyle, with the most recent move Tim has made being to employ his wife as a chartered accountant.
Because his wife wanted to focus less on her work and more on her family, this new setup works perfectly for them.
However, it’s the impact on their taxable household income that holds the most significant benefit, tax-wise. By employing his wife, they are both taxed, rather than just Tim, which means that they can both take advantage of lower tax bands, maximised personal allowances and lower contributions to national insurance.
By setting up an SSAS (a Small Self Administered Scheme) when he bought his office premises, the guaranteed rent was attributed to his pension – tax-free! This is a fantastic way to enjoy savings on income tax and national insurance, although this is subject to limits that Tim would be more than happy to discuss with you.
On top of this, you can also enjoy a deduction on your corporation tax, saving even more.
When he retires, Tim plans to take out 25% (which is tax-free, don’t forget) and leave the rest to be spread out over the remaining tax years, which allows him to take even more advantage of tax rates and personal allowances.
Within the last tax year, Tim had much higher outgoings than usual. He had extensive upgrades carried out on his home and booked a family holiday to Florida and a trip to Paris with his wife to celebrate their tenth anniversary.
For this to be possible, he took out just over £2K as a tax-free dividend.
Tim will readily admit that he doesn’t take much interest in cars, but he is interested when a vehicle can lead to tax savings. He enjoyed 100% relief on his corporation tax against his tax year profits by investing in an electric vehicle.
Additionally, he can take advantage of putting his running costs through the business, as well as the cost of installing a charging point at his home and office and all of the required services and insurance – tax-free!
Tim looks to maximise his business expenses wherever he can, including claiming back any travel expenses, mileage allowances and any money spent on food and drink when travelling for business.
By investing in a points reward card, he can practically double his tax savings. That trip to Paris and Florida we mentioned earlier? Tim used air miles from his points reward card of choice and travelled first class; now that’s a saving.
As with so many people trying to get their new business off the ground, Tim invested his own money into the brand. However, he also ensured that his business repaid him a commercial interest rate. This resulted in him being able to take out £1K from his company, once again, tax-free.
Once all of his investment was paid back, Tim had to find an alternate way of releasing funds. So, when the company had spare cash flow, he took out a £10K loan (tax-free). He then invested that money with a great result.
Tim makes full use of the tax savings available through employee benefits, which includes:
Do you want to enjoy similar savings for your business? Then, book a free consultation to discover how much you can save every year.
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