Tax EfficiencyHow to Keep Your Business as Tax-efficient as Possible

Making tax efficiencies wherever possible can save a small business up to £900 a year, and that’s just for filing to HMRC on time! Nobody wants to overpay tax, but it’s easily done if you aren’t scrupulous with your bookkeeping and savvy about the right way to manage your business finances.

Our accountants and financial experts have pulled together this handy guide, to help you spot the potential tax efficiencies that could benefit your business. You can also contact us for a free 1-hour consultation call, and receive personalised advice on tax efficiency from an expert accountant, with no strings attached.


Submit Your Self-Assessment Tax Return Accurately, and on Time

Small business owners, company directors and sole traders all need to complete a self-assessment form and send it back to HMRC every year by 1st January. This is so that the government can accurately work out how much tax you owe to cover the financial year.

In order to keep your business tax efficient, you need to ensure that you submit your self-assessment tax return on time every year – in fact, not doing so could cost you up to £900. It’s not just a matter of submitting your tax returns on time either; you will need to ensure that the form is completely filled in and accompanied by the correct supporting evidence, otherwise you could face a penalty for submitting an inaccurate/incomplete tax assessment.


Here’s what you need to consider when filling in a tax return:

  • Are you submitting under the right business classification? Ensure that you’re clearly stating whether you run a limited company, corporation or are registered as a sole trader or partnership, in order to avoid paying additional tax unnecessarily
  • Do you have full records of your business income and outgoings, including staff pay, invoices from contractors and subcontractors, receipts for expenses and purchases, invoices for income paid to your company by clients and anything else related to your business finances?
  • Have you noted the reasons for any withdrawals from your business bank account, and accompanied those notes with an explanation of what the money was used for?
  • Have you factored in any necessary capital gains or losses? This is relevant if you have written off a debt or sold a significant company asset and received a lump sum
  • Do you have notes of all the company equipment you’ve purchased for staff, as well as your overheads for running your physical operation, e.g. heating bills for the office?


If that’s all sounding a little bit overwhelming, don’t worry. wedo accounting can take care of everything related to self-assessment tax returns for all of your company directors, and keep accurate records on your behalf to support your HMRC submission.


Consider Registering as a Limited Company to Make Further Tax Efficiencies

Did you know that by registering your small business as a limited company, you could make significant tax savings, of up to £3,500 a year? That’s because if your business turns a profit after you deduct your salary, you can benefit from paying corporation tax at just 12.5% instead of personal tax, which can be as much as 55% depending on your income and outgoings.

The act of registering as a limited company is called incorporation, and it’s a process that we can take care of for you by filing the correct documentation with HMRC and overseeing the details. If you’d like to find out more about incorporating your business, we can discuss it during your free initial 1-hr consultation call.


Find Tax-Efficient Ways to Extract Company Profits


Re-investing your business profits in company overheads is one way to ensure that you remain as tax-efficient as possible.


Making employee pension contributions can offer you tax relief, as this money isn’t considered a benefit. Because paying pension contributions reduces your overall profit, this equates to a reduction in corporation tax paid. There is no limit on how much a company can pay into a pension scheme, and the first twenty five percent of your pension pot is free to withdraw, so it’s worth considering how yours is set up and whether there are more tax-efficient ways to run it.


ividends to shareholders is another way to see tax advantages; each shareholder can receive up to £2,000 of dividends in any fiscal year before paying tax, and dividends are exempt from National Insurance Contributions, so as long as you issue an accurate tax notification when paying them, dividends could help you make tax savings.


Other options for making tax-efficiencies include paying company directors bonuses, making private investments and ensuring that you don’t take a salary that pushes you into the top tax bracket, which can end up costing you 55% of your income.


Speak to an Expert Accountant about Making Tax-Efficiencies for Your Business

If you’d like to benefit from the expert advice of a wedo accountant, why not take advantage of our free 1-hour initial consultation? We can meet face-to-face with potential clients in the London area, or offer a phone consultation if that works better for you.