3 Tax Efficient Ways of Running Your Business in the UK

Running your business efficiently avoids stress, burn-out and even depression. There is a lot of help and resources available to help you start and run your business.

# 1  Maximise Your Expenses To Income Ratio

Expenses are not subject to tax.  You are only taxed on profits.   Your expenses reduce the profit on the income.  Therefore it is tax efficient to make all the expenses required for your business to go through your business accounts in order to reduce the amount of tax you are liable for.

As a new business, you may be eligible for Capital allowances.   Capital Allowance scheme gives tax relief on business equipment like computers, cars, tools or furniture that you intend to keep. In your first year of business, there are some extra allowances.   You can also take advantage of Research and Development Relief.   Research and development (R&D) relief is a Corporation Tax relief which can either reduce a company’s tax bill or, for some small or medium sized companies, provide a cash sum.

#2  Make Efficient Workplace Pension Provision

Workplace pension provision is a tax efficient way of running your business as pensions give some tax breaks.   Given that they provide a mechanism for savings they are good for both the employees, and the employer.   Pension schemes that are registered with HM Revenue & Customs (HMRC) can qualify for tax relief on:

• pension contributions
• investment income and gains
• some lump sums paid from the scheme

Payments made to members or employers that don’t meet certain conditions are classed as unauthorised payments.   The member, employer and the pension scheme have to pay tax charges on unauthorised payments.

A pension scheme doesn’t have to be registered but most do because of the tax advantages. Non-registered pension schemes don’t qualify for tax relief on employee contributions or investment income and gains.

#3  Maximise Your Dividend To Salary Ratio

Dividends are subject to preferential UK Corporation Tax.   You pay tax at different rates on UK dividends (income from UK-resident company shares, unit trusts and open ended investment companies) than you do on interest from savings, such as bank and building society interest. They are exempt from National Insurance contributions.   Salaries are subject to both Income Tax and National Insurance Contributions.

Do you have any tips of your own?  You are welcome to share!

About The Author

Chuck

It all started with Eze (fondly called Chuck) fainting at the airport. When he regained consciousness, Chuck found himself in a mental hospital. He was diagnosed with Psychotic Depression. Over time, Chuck was diagnosed with a range of other mental illnesses with the final one being Schizophrenia. Unbeknown to him about this latest record on his medical files, Chuck carried on with day to day living over the next 14 years until he met Zoe. Over the next 4 years, Chuck and Zoe began a journey of faith to defy the odds of mental illness. Today Chuck’s medical records say NO MENTAL ILLNESS. He defied mental illness and is helping others do the same.

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