Summary Tax Tips for Individuals
Small Companies Tax Tips for Businesses
I will be receiving a Fellowship award from the Chartered Institute of Taxation for my thesis on the taxation of small companies in London on 24 March 2006.
If you would like the latest information on the taxation of small businesses then please email me and I will respond next week.
Tax Tips for Individuals
1. Make sure you claim the childrenís tax credit. It is now worth more than ever.
2. Consider taking a salary increase instead of the company car, then using your own car for business and claiming mileage. From 2008/09 consider having a company car with emissions of 120g/km or less, as the benefit in kind charge will only be 10% of the list price (as opposed to 35% for most cars).
3. If your employer is not paying you the full 40p per mile, then claim the difference on your tax return.
4. If you donít like paperwork, then go to www.hmrc.gov.uk and register to prepare your own tax return using the internet service or contact me for a tax return efiling service starting from £75 plus VAT.
5. Encourage your employer to loan or sell you a bicycle.
Tax Tips for Businesses
1. If you are not already benefiting from the low corporation tax rates, then consider forming your own limited company now. Despite the increases in Budget 2006 trading through a limited company could still save you over £3,000 per year. Small Businesses
2. If you incur wages or consumables costs on research and development, then make sure you or your accountant are claiming the research and development tax credit.
3. If you donít like paperwork, then look into the VAT Flat Rate Scheme. The incentives are higher for businesses in their first year of VAT registration.
4. The benefit in kind rules now apply to computers or second mobile phones provided to employees for their personal use.
New Corporation Tax Rules
The corporation tax on profits up to £300,000 is only 19%.
From 1 April there is no further corporation tax to pay when money is paid out as dividends.
Research & Development Tax Credits
Since April 2000, small and medium sized companies spending over £25,000 on research & development (r&d) have been able to claim tax credits on most of their r&d expenditure. In some cases a tax refund of 24% of r&d spending can be obtained. Qualifying expenditure is salary costs, consumable stores and 65% of payments for sub-contracted r&d work.
This scheme has now been extended to large companies.
Limits for operating PAYE
The threshold for tax and National Insurance has been increased from £94 per week to £97 per week (or from £405 to £420 per month).
Incentives for E-filing PAYE Returns
Small business that file their 2005/06 PAYE returns electronically will be given a £250 incentive.
VAT Flat Rate Scheme
The scheme is available to businesses with taxable turnover of up to £150,000 per annum. The flat rates have been reduced and there is an extra 1% reduction on the rates for business in their first year of VAT registration. Under the scheme, a business completes its VAT Returns by taking turnover and multiplying by an agreed percentage and thatís it. Details of the flat rates for particular businesses can be found at www.hmce.gov.uk
No analysis of VAT on purchases is required.
Enhanced Capital Allowances for Energy Efficient Equipment
100% capital allowances are available for certain items of plant and machinery, including cars with fuel emissions of not more than 120gm/km CO2. The scheme is being expanded
See www.eca.gov.uk for details.
Tax Rates and Allowances
The personal allowance is increased from £4,895 in 2005/06 to £5,035 for 2006/07. The 10% band is increased from £2,090 to £2,150. The starting point for the 40% band is increased from £32,400 to £33,300.
From 2003/04 gift aid donations made up to the time that you file your tax return can be carried back into the previous tax year.
THIRD WORLD ISSUES
In February 2004 it became a criminal offence for a UK citizen to bribe a foreign official.
From 1 April 2002 bribes are not tax deductible.
Drug Research Into Third World Diseases
Expenditure on research into TB, malaria, HIV and AIDS
qualifies for an extra 50% deduction for corporation tax purposes.
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Last modified: November 30, 2008