Ensuring that both you and your business are as tax efficient as possible is a common topic of discussion when we speak to our clients. Putting in place different strategies based on their personal situation, and where they want to be in the short or long term is an area that we specialise in.
Join us for our one-hour webinar on 29 March at 10:00am where our Head of Accountancy, Vanisha Narayan, will be discussing different tactics that you can use to take advantage of different tax reliefs.
Research and Development tax credits
We’ve covered this topic a number of times through blog posts and our recent webinars. Research and Development tax credits (R&D) offers a huge benefit to SMEs that do just that – whether it be technological advances, creating a new product or developing new ways of working.
The scope for R&D is so wide that we have a number of consultations with business owners who didn’t even know that they qualify. With an enhanced deduction of 130% from your taxable profits – it’s worth looking into and speaking to us, if you do carry out any sort of Research and Development.
Capital allowances and the super deduction
If you’re thinking of investing in computer equipment, or an office refurbishment, now is the best time to do so. The government has enhanced the annual investment allowance up to £1m for qualifying expenditure during the period from 1 January 2022 to 31 March 2023. This essentially means that you are able to claim back £1m on qualifying fixed asset purchases through capital allowances.
From April 2021 to 31 March 2023 SMEs can also claim a 130% deduction capital allowance on qualifying plant and machinery investments. The super deduction will allow companies to reduce their tax bill by up to 25p for every £1 spent – making the UK scheme the most competitive regime for capital allowances in the world.
Electric cars
Electric cars have been a hot topic for a while now , with many car manufacturers offering their own versions of electric vehicles. We’ve written a blog post about this in the past and along with the super deduction, there are big tax savings if you are looking to purchase an electric vehicle, with the government also offering a number of grants to SMEs in relation to this.
Salary vs Dividend
Being a director of a UK company can mean that there are a number of different ways that you can remain tax efficient. The salary vs dividend question is one that we often get asked by our clients, and what you can extract from your company can vary year on year, depending on the tax rates.
Directors are technically employees of the company, therefore national insurance (NI) contributions (employers and employees) are paid on any salary payments. The personal allowance for 22/23 remains at £12,570 per year, and higher rate tax starts at £50,270.
Therefore, we would recommend taking a salary of £9,100 and a maximum dividend of £41,170. This not only keeps you within the primary and secondary threshold, but also means that you are not paying employee or employer NI.
The dividend tax free limit remains at £2,000 for this tax year too, this means that you can extract £2,000 worth of dividends without a personal tax liability attached to it.
Pensions
With the help of our Fusion Financial team, you could look to set up a corporate pension, and make contributions through your SME which is fully tax allowable. As such, not only does it reduce your profits, but it also reduces your corporation tax liability.
