Basic Tax Tips

So say those helpful HMRC adverts reminding us to pay our income tax on time.

Of course! we all have to pay our fair share of taxes. But there’s no reason why you should pay more than your fair share of that tax burden. With efficient tax planning you could save tax. If you don’t have a proactive Accountant, or you would simply like someone to give you a fresh perspective on your options, we would be delighted to help you.

Minimum Wage Law

Tip: Always ensure that you stay right side of the minimum wage law.

Current rates from 6 April 2023:

• £10.42 per hour for ages 23 and over.
• £10.18 per hour for ages 21 to 22
• £7.49   per hour for ages 18 to 20
• £5.28   per hour for school leaving age to 18
• £5.28   per hour for apprentices aged under 19

Self-assessment and the self employed

Tip: If you started a business then you will have to register with HMRC and file a self-assessment return by 31 January to avoid any penalty.  From beginning to end the process can be broken down into the following steps:

1. Get your UTR

2. Get an online account with HMRC

3. Prepare your tax return

4. Submit your tax return to HMRC.

Have you checked you tax code?

Tip: If you’ve received a notice of coding and you think it’s wrong ring HMRC straight away on the phone number on the letter. Explain why you think it’s wrong and they should be able to change it for you straight away based on your phone call.

Alternatively give Rosemoore + Co a call as we provide a code checking service and will be happy to help.

Micro Entrepreneur’s relief £1,000

Tip: The New £1,000 trading and property allowances…Also known as Micro Entrepreneurs’ Relief came into force with the effect from 6th April 2017. An individual can claim Micro Entrepreneurs’ Relief and pay no tax up to £1,000.

It should be noted that Micro Entrepreneurs’ Relief is not available to partnerships; it’s only available to individuals.

Taking money out of your business tax-efficiently

Tip: If your business is a limited company it often makes sense to get your money out by a combination of salary and dividends as well as other tax efficient strategies. It is worth regularly considering the most tax efficient options to maximise tax savings.

Save tax by investing in a personal pension

Tip: Subject to certain limits, pension contributions made personally are tax allowable – which means that the effective cost may be as little as 55p to invest £1 in a pension. If you don’t provide for your retirement, who else will?

Best time to invest in a new car, computer or business equipment

Tip: You will get tax relief a lot quicker if you make the investment shortly before rather than shortly after your business year-end.

Capital Allowances Claims

Tip: You can claim capital allowances when you buy assets that you keep to   use in your business, eg:

• Equipments and tools
• Machinery
• Computer
• Business vehicles, eg cars, vans or lorries

These are known as plant and machinery.

You can deduct some or all of the value of the item from your profits before you pay tax.

The current annual investment allowance limit is £1,000,000 for qualifying expenditures on plant and machinery, this is for 12 month periods from 1 April 2023. You get a new allowance for each accounting period.

Employee Season Ticket Loan

Tip: Your employer can pay you season ticket loan tax-free, if you are commuting for work.  Please check with your employer.

Travel Expenses

Tip: If you have incurred business travel expenses and the journey is classed as business journey, then cost is allowable against your profit or employment income if your employer has not reimbursed these expenses.

Junior ISAs

Tip: Junior ISAs are a popular way for family and friends to build up tax-efficient savings and investments for eligible children to help them with the cost of university, provide a deposit for a house or simply give them a great start in life.

No NIC Contributions

Tip: If you stay in employment after State Pension age (currently 63 for women and 65 for men) you'll need to provide your employer with proof that you've reached this age. This will allow your employer to stop deducting National Insurance contributions from your earnings.

VAT On Cars

Tip: If a car is on finance lease then the business can recover 50% of the lease payments assuming the business is registered and fully taxable for VAT purposes. This represents a major advantage for VAT registered businesses leasing cars rather than buying them.

Dividend Allowance

Tip: From 6 April 2023, the first £1,000 you receive in dividends from investments is tax free. Basic rate taxpayers will pay 8.75% tax on dividends they receive above the threshold however. Higher rate taxpayers pay 33.75% and additional rate taxpayers 39.35%. 

Gift Aid & Tax Relief

Tip: Making donations to charity through Gift Aid can reduce your taxable income. 

If you are in a higher rate tax bracket, you can claim back the difference between the basic and higher rate of income tax on any Gift Aid donations you made.