Ten tips to reduce your tax bill and boost your cash flow

From time to time we see reviews of what accountants and bookkeepers consider to be the top tips they pass on to their clients.  So here are the top ten tips accountants and bookkeepers are passing on to their clients to make sure they reduce their tax bill and boost cash flow.

1. Review the business structure. Sole traders working from home should consider setting up a limited company to benefit from lower business rates. This would enable them to pay corporation tax,currently at 20% but which will drop to 17% by 2020, instead of income tax at 20% or 40% for higher rate taxpayers.  We can set up a private limited Company for you and deal with all the associated paperwork and returns within our support for businesses.
2. Operate from home if you can. Self-employed businesses that spend time working from home can save tax by claiming for a proportion of a variety of home-related costs, or a single weekly amount.
3. Keep it in the family. Business owners can currently earn £11,000 of tax free income as salary. But by employing their spouse, partner or other family member as a director or partner they can distribute the income depending on their personal allowances and transfer assets or gifts to family members which is tax-free.
4. Use finance to fund major investments. Businesses should consider using external finance providers when seeking funding for any major capital expenditure projects. Specialist lenders can secure competitive rates and manage each transaction meticulously from start to finish. Companies can also opt to lease the assets rather than signing up to a straight hire purchase deal. Although there is a cost to the debt, it is tax deductable which can offer short and long-term cash benefits.
5. Leverage the Annual Investment Allowance (AIA). The AIA, set to £200,000 from April 2016, allows businesses to write off the costs of certain assets against profits in the year of purchase. This helps to bring quicker tax relief against capital expenditure. Most assets purchased for business use qualify including IT investments, office equipment and plant and machinery.
6. Consider the flat rate VAT scheme This scheme allows businesses to benefit from a single, fixed rate of VAT and apply the percentage to their gross turnover during a quarter and pay this to HMRC. Rates vary depending on a business’s industry sector but can offer a welcome boost to cash flow.
7. Claim for expenses. Organisations can reduce their tax bill by claiming for various company expenditure such as business travel, (ie mileage), IT equipment and tea and coffee making facilities which can be written off as a business expense.  Using a smartphone app ensures you don't lose receipts or forget to claim for business expenses while you're out and about.
8. Hire a bookkeeper. Obviously. Although potential clients may initially baulk at committing to additional costs, bookkeepers can save businesses significant amounts of time and money by managing their financial affairs and alleviate the stress associated with paying tax bills.  And with all your bookkeeping and accounting needs met through a single support package, you can focus on what you do best.
9. Introduce tax-free benefits. Offering employee benefits can help to save tax for both a business and their staff. Popular tax-free incentives include childcare vouchers, the Cycle to Work scheme which can save up to 25% of the cost of a new bike, workplace parking and meals in a staff canteen.
10. Plan ahead. Businesses should always plan ahead and set aside extra money when tax deadlines approach. But in the event of them being taken by surprise, organisations may wish to consider applying for short-term finance to cover the shortfall instead of having to delve into vital cash reserves.

If you'd like to find out more about how Whitehill can help you reduce your tax bill and improve your cashflow, contact us for a free chat with an experienced bookkeeper.