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SA Tax Accountants

Accountants in Milton Keynes

Tax compliance ways to reduce corporation tax

Business owners often operate through a limited company in order to legally reduce the amount of tax they have to pay. As responsible business owners, it’s important to ensure that you’re paying the correct amount of tax – while making sure you don’t pay more than you are obliged to by law. After all, who would say no to keeping more of their well-earned profits? Accountants in Milton Keynes can give you free 30 minutes consultation to minimize your liability while tax compliance.

There are two key components to consider: sales and expenses. The key to reducing your company’s corporation tax liability is therefore to check that all your sales and expenses are correct. Easy, right?

SA Tax Accountants put together seven effective ways you can ensure you’re not paying too much corporation tax. Please take this information as very general advice.

 You should always speak to a tax expert for tailored advice and support – SA Tax Accountants, more than happy to help!

Here are a few basics every company director should know to ensure they’re not paying more tax than they need to…

1. Check sales are not overstated

This is why you should ensure your bank reconciliations are up to date. Are there any invoices you raised in error or jobs that didn’t come to pass? What about bad debts? Don’t have a bookkeeper? We can provide world class book keeping services.

2. Check you’re taking the correct directors salary from the company

Your accountant (hopefully) will be able to confirm the salary you should be withdrawing every month. Salary is a valid tax deductible business expense and therefore reduces the profit and corporation tax.

3. Time your equipment purchases

If you carefully plan any purchase of equipment, tools or vehicles so that you’re timing them in a tax-efficient manner, you could save money. If you are considering a purchase, aim to purchase before your year-end to ensure you get that tax relief as soon as possible.

4. Claim your work-from-home costs

When working from home, your company has the option to reimburse you for certain expenses related to running the business. You have the opportunity to claim the basic allowance, which amounts to £6 per week (or £26 per month), without the need to itemize or provide justifications to HMRC.

Another option is to claim for the apportioned cost, which is available for individuals who work from home for at least one full day per week and have a designated office space in their residence. The claimable amount is determined by the proportion of the house area used for business purposes, the frequency and duration of its use, as well as the costs directly attributable or apportioned to this business usage.

Calculations and Costs:

The expenses that can be proportioned include mortgage interest (excluding repayment element), rent, water, gas, and electricity. Additionally, you may be eligible to claim a portion of your landline and broadband costs. Opting for the apportioned method requires you to demonstrate that you have a dedicated and functional workspace used exclusively for business purposes. Furthermore, you must be able to provide evidence of your calculations to an HMRC inspector upon request.

5. Pay into a company pension

Any contributions paid into a company’s pension scheme for directors and employees qualify for 100% tax.

6. Make sure your mobile phone contract is in the company name

7. Check you’ve claimed any business mileage

You can claim business mileage from your limited company when driving your own car for business purposes. Here’s a table of rates for 2021/22:

Tax: rates per business mile

First 10,000 milesAbove 10,000 miles
Cars and vans45p (40p before 2011 to 2012)25p

Your employee travels 12,000 business miles in their car – the approved amount for the year would be £5,000 (10,000 x 45p plus 2,000 x 25p).

It does not matter if your employee uses more than one vehicle in a year – it’s all calculated together.

Next steps

Feel free to get in touch with our Tax advisor, to see how we can ease your tax and accounting headaches. Feel free to give us a call or drop us an email. We’ll be more than happy to help advise you, taking your individual circumstances into consideration.

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