Let’s face it – no business owner wants to pay more tax than the actual amount rather they try to discover legal ways to reduce the amount of tax bill, especially corporate tax. What corporate tax is? Why businesses find ways to reduce it? You may be one of them having this question in mind, right. If you’re also finding ways to reduce corporate tax through legal ways, you have come to the right place. Here I will enlist 8 best legal ways to reduce your bill.
But before I talk about the ways, here is a quick note on ‘what corporate tax is’ for those who aren’t aware of it.
In layman’s terms, corporate tax refers to the tax that businessman has to pay on the profits earned in the company. What businesses need to pay corporate tax? According to HMRC, if you’re running club, limited company, co-operative, foreign country having UK branches or offices, and other unincorporated association like sports club.
Now that you know about corporate tax, let’s look for the various ways to reduce it.
A list of 8 best legal ways you need to follow to reduce your corporate tax bill
1. Claim all your business expenses
The best way to reduce corporate tax is to record each and every single and petty expenses pertaining to your business. Moreover, the expenses build up throughout the year. In fact, if you fail to claim all the amount of expenses, you may be wasting money recklessly. So when you have a complete report of your company’s expenses, it reduces your company’s profit and thereby reduces the amount of tax that you need to pay. However, if you outsource accounting services, this makes your task much easier.
2. Make use of company’s mobile phone
Another way to reduce corporate tax is by using company’s mobile phone if your business involves in calling and makes regular phone calls. If your company’s staffs make regular phone calls on their personal mobiles, here you need to consider using business phone. Well, there is no charge to tax for employees on the cost of the phone. With this, the company gets a tax reduction for its costs.
3. Throw a staff party and claim
How a party can help in reducing corporate tax amount? Think is what you’re thinking right. Here read how – as a limited company, you can hold an annual party, and claim up to the value of $150 for each guest. Moreover, you can invite family members too. Then you can claim corporate tax relief on the overall cost without being hit by a ‘benefit in kind’ charge. Here you will end up saving big amount of tax.
4. Invest in asset like plant & machinery
Next way to reduce the corporate tax bill is to invest in plant & machinery. As a company you can benefit from the ‘Annual Investment Allowance.’ Investment in heavy asset allows businesses to claim immediate tax relief when you buy certain business asset up to a specified limit. If you have amount to invest, this is a best option for you to go with for reducing tax.
Note: Curvearro is a marketing & website partner of Kayabooks. If you want to avail digital marketing services, contact them.
5. Don’t forget to pay yourself salary
This is the most useful tip to reduce corporate tax that most companies seldom ignore. Unlike dividend, salary is defined as business expense which at the end leaves you with corporate tax to pay. Therefore, paying a salary will reduce your profit as well as tax bill. This is a nice tactic you can take advantage of.
6. Claim mileage allowance relief
What is mileage relief? So if you use your own vehicle to carry out business work then you’re ready to claim tax relief on the mileage rate. This basically refers to the cost of owning and running the vehicle. In fact, this is the most tax-efficient method for business owners and staff to use your own car and claim mileage by using the HMRC’s official authorized mileage rate.
7. Offer share schemes
Another legal way you can use to deduct corporate tax is by offering share schemes to your employees. This is actually an effective way to incentivise and reward them. For example, you can ask employees to buy certain number of shares at a fixed price. There are many schemes available, make sure you use the best for your business that will help you reduce corporate tax.
8. Hire a good accountant
Last but not the least legal tip you can follow is go with an accountant who will help you know how you can reduce corporate tax at the end. This point works when all the above mentioned points don’t seem to deliver you results. It is obvious that hiring an accountant will cost you but don’t forget that a good accountant will save you huge money.
The bottom line
Finally, the concluding part of this article says that every business needs to pay corporate tax every year but there are legal ways also that can help you reduce tax amount. Certainly, tax is a complicated process which always requires a professional advice. Well, I have mentioned the best 8 legal ways which you can easily follow to reduce corporate tax bill. I hope the article if enough informative for you. Even if you want bookkeeping services, contact us.
Have any query related to this article? Why not get in touch with us.