Five ways to reduce your tax bill ...
... especially for Small Business
1. Claim all your expenses
Bills not yet received, start up costs, working from home expenses etc. Are you absolutely sure you are claiming for everything. Have a good chat with your accountant - tell him/her everything about your company. Make sure he understands your unique business. Remember HMRC won't remind you if you don't claim some expenses - your Accountant always should!
2. Cars
There are a few ways of looking at this and it needs good tax planning. If you're a Sole Trader and your turnover is less than £73,000 and your car isn't relatively new, the simple way is to claim 45p for every mile. If you're a limited company you can usually claim the cost of the car (but usually only 10% per year) and then you will be taxed on your private element. The tax will depend on your C02 emissions so the lower the emission figure the better, but it might be wise even for a limited company not to bring the car into your business..
3. Claim the full cost against your profits
The tax man continues to change the rules on capital allowances. Sometimes it's hard to keep up with him. If you're thinking of purchasing any capital items (other than a car) you're entitled up to £100,000 tax relief. It doesn't matter when you buy the asset you can still claim the full cost against your profits, even if you buy it on the last day of your year end. However, don't forget this Annual Investment allowance is been reduced to £25,000 from April 2012 so you might need to act fast!
4. Integrate your accounting system
Make sure everyone comes together - Payroll, VAT and your Balance Sheet. A good accounting system means you should be able to check how your doing and have a comparison to budgets/last year at any time of the week or month. Also, it helps if you invoice your customers by e-mail directly from your system. Having a good system saves you hours of work and will make sure you're always on top of everything. It will save you costs because you will always be in control and know which customers haven't paid you yet and you will know exactly what you're spending and how you're doing against your budget.
5. Your greatest assets are your employees
They're also your greatest cost! You also pay 13.8% National Insurance on everything you pay over the NI threshold and your employees also pay tax of 20% and National Insurance of 12%. So for instance if you're employing someone and paying them annually £35,000 you also have to pay £3,833 in Employers N. Insurance. Therefore in this example your employee costs you in total £38,833 and worse than that he or she only receives £26,162 in net pay. The tax man gets a whopping £12,671 out of the bargain!
Try sub-contracting some costs - it will save you 13.8% National Insurance and maybe other costs too.
Also, try using part-time staff and paying them less than £139 per week. Then neither you nor your employee will have any N.Insurance to pay. If your employee has no other job, he/she won't pay tax either.