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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, Accountants in Milton Keynes , 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, Accountants in Milton Keynes 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 SA TAX Accountants , Accountants in Milton Keynes can provide world class book keeping services.

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

Your accountant (hopefully SA TAX Accountants) 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

If you’re working from home, your company can repay you for some costs associated with running the business. You can claim either the basic allowance – up to £6 per week (or £26 per month) without having to itemise or justify the costs to HMRC.

Alternatively, you can claim for the apportioned cost. This is for people who work from home at least one full day per week, and have dedicated office space in their home. The amount you can claim will depend on proportion of the area of the house is used for business, how often the area for is used for business and how long for, plus the costs you can attribute or apportion to this business usage.

Calculations & Costs:

The costs you can proportion are mortgage interest (excluding repayment element), rent, water, gas and electricity. You may also be able to claim a proportion of your landline and broadband costs. If you choose to use the apportioned method, you’ll need to ensure you can prove that you have a functional work space that’s used exclusively for business. You’ll also need to be able to provide evidence of your calculations to a HMRC inspector, if requested.

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
Motorcycles24p24p
Bikes20p20p

Example
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 Accountants in Milton Keynes, SA TAX Accountants 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.