Pension Contributions - Pension contributions are tax efficient for employers, employees and individuals. Contributions are an allowable expense therefore result in a corporation tax saving for employers, they are free of income tax and national insurance for the employee and individuals can claim tax relief for any contributions they have made to a personal pension scheme. For higher rate taxpayers, these personal pension contributions can reduce the tax paid at the 45% additional rate.
Capital Allowances - Capital allowances reduce taxable profits, these can be claimed on qualifying assets, some allowances give an immediate tax relief of 100% of the allowable expenditure. There are a number of assets which qualify for capital allowances, including cars, furniture and fixtures and plant and machinery. The claim for capital allowances should be maximised and the timing of expenditure should be carefully planned in line with these claims.
Extracting Profits - Profit extraction from a Limited Company needs to be done in the most tax efficient way, especially as the top rate of tax is 45% for some incomes types! This can be done in a number of different ways for directors/shareholders which include taking dividends rather than salary, the company making pension contributions and also by receiving tax efficient benefits.
R&D Claims - Companies with qualifying research and development costs can claim an additional 130% tax relief. The project undertaken must seek to achieve a development in knowledge or capability in a field of science or technology through the resolution of technological or scientific uncertainty. The scope of this is a lot wider than some people realise therefore you may be entitled and not even realise this is the case!
Entrepreneurs’ Relief - Entrepreneurs' relief relates to the sale of shares or part/all of a business. It can offer significant tax relief to the individual or trustee selling the shares. The gain on the sale of shares is reduced to a very low tax rate of just 10% of the gain.
Family Owned Tax Planning - The structuring of a family owned business, in a commercial way but tax efficient way, can help maximise tax reliefs.
Marriage Allowance – Married couples and civil partners can share 10% of their personal allowance. The unused personal allowance of one partner can be transferred to the other meaning an overall tax saving for the couple. The recipient must be a basic rate taxpayer and claims can be backdated up to 4 years.
Personal allowance – Once your income exceeds £100,000 you must complete a tax return and you start to lose your personal allowance so have to pay back any underpaid tax. To reduce the amount of personal allowance which is lost individuals can look at paying in to a personal pension and can also make gift aid donations. A salary sacrifice in exchange for company benefits could also be effective in this situation.
Tax Credits/Universal Credit – For self employed individuals with a fluctuating income could consider a protective claim, especially in the current climate. Universal credit is calculated and paid monthly based on your income each month whereas tax credits are assessed annually. Your individual circumstances will determine which scheme you can apply for.
Jointly owned property for married couples – On 'Form 17' a married couple can make an election to be assessed on the income arising from the property based on the proportion of their beneficial interest rather than being taxed equally.