Business Tax Planning
Why choose Freedom in Numbers to help you with tax planning?
Tax is a tricky business, and you need to make sure that you understand it to the best of your abilities.
Proper tax planning makes it easier to build your personal finances and afford the things you want, including the sort of retirement you actually want.
By anticipating taxes when you create your financial plan, it’s possible to significantly boost how much money you will have in retirement, and equally minimising the taxes paid to boost that plan.
If tax planning sounds like more of a headache than you thought or is simply not your strong point, we can take care of your tax planning, freeing you up to do the things you like to do in your business.
Tax planning is a way to find out how much you are paying in tax and also a way to help minimise your tax bill (the amount owed to the HMRC) through the use of allowances, deductions, exclusions and exemptions.
Tax planning can be used in a number of ways, not just for business. It also includes planning for retirement, wills, and properties.
Short term planning allows you to reduce taxes at the end of the income tax year. Long term plans allow you to plan at the end of the beginning or end of the year.
The Freedom in Numbers team are always on hand to provide support suited to your business, including advice on getting the most out of your finances.
Don’t panic, we’re here to help!
What is tax planning?
Tax planning is the process of minimising a tax liability by making sure you’re making use of all available tax saving opportunities. This includes all available allowances, deductions, exclusions and exemptions, and ensures they are working together in the most tax-efficient manner to reduce the total tax bill.
There is a wide range of reliefs and provisions that are available to legally reduce a tax liability without it becoming tax evasion (which is illegal).
There are two areas of tax planning; those that save tax for your business and personal taxes (business tax planning), and those that save tax regarding your personal assets when you’ve passed away (estate tax planning).
Why is tax planning important?
Tax Planning has an important role to play when considering your financial future.
By carefully considering the tax implications of your financial plans we can reduce the amount of tax you have to pay, for both your business and yourself, meaning more money is retained.
What are the benefits of business tax planning?
There are benefits of tax planning for both large and small businesses and planning plays an important role in:
Lowering the amount of taxable income,
Reducing the tax rate,
Allowing greater control of when taxes get paid,
Maximising tax relief/tax credits available.
If you expect to hold a significant profit in your limited company this year, then it may be wise to draw out a large dividend to make use of the £2,000 tax free dividend allowance, and any unused personal allowance, before you pay tax at 7.5% / 32.5% / 38.1% (dividend rate).
Why choose us for tax planning support?
As a business owner, it’s important that you are aware of what tax saving opportunities are available to you, and how they can mean more money in your pocket.
Without keeping tidy records and being timely with your reporting, tax saving opportunities become harder to find, as you often won’t know what your tax position is until it’s too late.
At Freedom in Numbers, we’re here to support your business, and take away the stress of the administrative side of business, giving you your freedom back.
Our bespoke bookkeeping services are tailored to your business, and flex to fit the activity of your business.
We offer a monthly fixed fee service that it tailored to your business and will include all the services you’ll need to get started, including dealing with the HMRC on your behalf!
We will save you time and money.
We’re confident that you’ll love our brilliant customer service and have an excellent experience working with us.
Still unsure what everything means?
No problem, we’ve got some FAQ’s that will help answer your questions.
How can I minimise my tax bill?
There are a few ways to minimise how much tax you pay personally as a business owner.
If you don’t have any employees, you’ll want to make sure you don’t pay yourself too much and then have your company end up paying employers national insurance. If you have employees, you can claim employers allowance (£4,000 p/a) and reduce the amount of employers national insurance you pay, meaning you can take a slightly higher salary.
For the 2021/22 tax year, if you don’t have any employees we recommend a salary of no more than £8,788 per annum, with the rest of your remuneration paid in dividends which are taxed at a much lower rate.
As a shareholder, you will also receive a £2,000 tax free dividend allowance on top of your £12,570 tax free personal allowance.
If you have employees, then you can still make tax savings by taking a slightly higher salary (which in turn will reduce the amount of corporation tax your business pays), and dividends.
Can my limited company pay into my pension?
Paying pension contributions is tax-efficient because you’ll reduce your company’s taxable profits and therefore save your business corporation tax.
Paying through your limited company directly into your pension is usually more tax-efficient than making the contribution from your own funds.
How much tax can you save?
For the 2021/22 and the 2020/21 tax years, the Corporation Tax rate is 19%, so for every £10 your company earns as profit, you’ll pay Corporation Tax of £1.90, reducing the amount you can take from your company as a dividend to £8.10.
Extend that to £100,000 of profits, the corporation tax would be £19,000, leaving you with £81,000 in dividends – that’s quite a big tax bill isn’t it!
Simply paying (for example) £100 into an employee’s pension fund effectively costs the company only £81 due to the corporation tax saving and, eventually the £100 investment can grow within the pension fund.
As pension schemes are very complex, we strongly recommend you take specialist advice from an independent financial advisor before making any contributions into an employee pension scheme (including your own).
What are the tax rates for dividends?
Dividends are taxed at 7.5%, 32.5% and 38.1%.
The rate you pay depends on your total income for tax, and aligns with the income tax thresholds.
The first £2,000 of dividends – tax free
£0 – £12,570 – tax free
£12,571 – £50,270 – 7.5%
£50,271 – £150,000 – 32.5%
£150,001 and above – 38.1%
Freedom in Numbers - Accounting and Business Support
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I asked Hannah to complete my first self-assessment as I wanted to make sure that I included everything that I needed to and make sure that it was correct! Hannah was a great support, patiently answering lots of questions and helped me identify a couple of things which I had missed too. I would definitely recommend Freedom in Numbers, thank you!
Hannah and the team have exceeded all and any my expectations. Always friendly and always willing to speak to you on the phone if you raise and issue. Superb accountants
A very friendly, easy to talk to, accountants that understand how to use technology to make accounts easy.
From the outset Hannah has provided up to date information, sound advice and a comprehensive schedule for us to work to. Always quick to respond to questions and answers honestly. It’s very refreshing to meet an accountant who genuinely wants to help small businesses grow and to understand the individual.
An amazing accountant, quick, efficient, helpful, responsible and reliable. A pleasure to work with offering a personalised friendly service and a professional approach. My business is in safe hands. Extremely happy with how quickly emails and various questions are answered.
Freedom in Numbers has been great for setting up my start-up. They onboarded my business onto a modern accounting software system, like Xero which I can also login to, and then provide ongoing guidance on complicated issues. I now have a solution that gives me control, cost effectiveness and expertise I can rely on when I need it.
Freedom in Numbers have been an extremely valuable partner in supporting the growth of our business. As well as being diligent and dedicated accountants and financial managers they add tremendous value in terms of helping us improve processes with smart technology and systems. They’re extremely flexible and have helped us manage rapid growth and our changing business needs and have fast become an indispensable part of the team shaping and growing our business.
Hannah is my 3rd accountant in 3 years of running my business. I struggled to find an accountant who was dedicated to helping new start up / small businesses get set up properly and feel fully supported. I needed an accountant who would be patient, explain things, support me and work as an extension of my team. I won’t be changing accountants again. Hannah is wonderful. I finally feel I have someone I can trust to make sure the finance side of my business is being taken care of leaving me free to do what I enjoy most and what I’m good at in my business. I very highly recommend Hannah.