Introduction:
Nobody likes paying taxes, but when it comes to corporation tax, a little bit of wizardry can go a long way in reducing your liability. The UK Government’s recent increase of the main rate from 19% to 25% has made it even more important for businesses to explore ways to minimize their corporation tax. Fear not, fellow tax adventurers! In this light-hearted article, we’ll reveal 15 enchanting tips to help you navigate the tax maze and reduce your corporation tax bill. Grab your magic wands and get ready to discover the secrets of tax efficiency!
1. Claim R&D Tax Relief: Unlock the Treasure Trove of Innovation
Are you a modern-day alchemist, brewing innovative ideas? If your business invests in research and development, you could be eligible for government-backed R&D tax reliefs. These enchanting reliefs can help you save up to £25,000 in corporation tax for every £100,000 spent on innovation.
2. Pay a Lower Effective Rate with Patent Box: Your Secret Spell for Profitable Patents
If your business holds patents, the Patent Box offers a reduced rate of corporation tax at a mere 10% for profits generated from patented income. It’s like a magical elixir that rewards your creativity and encourages investment in innovative technologies.
3. Don’t Miss Deadlines: Time Travel to Claim Tax Reliefs
Magic is all about timing! Ensure you meet all deadlines for claiming tax reliefs, including R&D tax reliefs, Capital Allowances, and Patent Box reliefs. Don’t let those opportunities slip through your magical fingers!
4. Invest in Plant & Machinery: Wave Your Wand and Claim Tax Relief
The Annual Investment Allowance (AIA) is your magical tool for claiming tax relief on certain assets. With the current limit set at a generous £1 million, you can write off a significant portion of qualifying investments against your profits.
5. Capital Allowances on Property: Discover Hidden Treasures in Commercial Buildings
Explore the world of capital allowances on property. Claim a straight-line writing down allowance of 3% on new commercial building expenditure since April 2020. Don’t forget, you can also dig into past years to uncover any missed allowances!
6. Don’t Forget to Claim All Business Expenses: The Potion of Deductions Sometimes the most obvious spells are the most overlooked. Ensure you claim all business expenses from your accounting records. Don’t let any expense go unnoticed and unclaimed!
7. Use Directors’ Personal Allowance Effectively: A Spellbinding Combination of Salary and Dividends
As a director, make the most of your personal allowance by drawing a tax-efficient combination of salary and dividends from your business. It’s like finding the perfect magical balance!
8. Pension Contributions: A Magical Deduction for Your Business
Contribute to pension schemes for your employees or directors and enjoy a deduction from your business’s profits. It’s a straightforward way to reduce your corporation tax while helping secure your employees’ financial future.
9. Claiming Business Mileage: Cast a Tax-Free Travel Spell
If your employees use their personal cars for business purposes, they can claim tax-free expenses based on statutory rates per mile. It’s like teleporting without paying any tax!
10. Work from Home Allowance: Alleviate the Magical Burden
If you work from home, HMRC allows you to claim a portion of your home expenses to cover additional costs like heating, lighting, and internet access. A £6 per week payment from your employer is an acceptable starting point.
11. Creative Industries Relief: Unleash the Magic of Tax Breaks
For the creative minds in video game development and other creative industries, there are tax reliefs available to reward your talents. Video Games Tax Relief and other creative industry reliefs can help you lower your corporation tax bill.
12. Share Schemes: A Magical Incentive for Your Employees
Reward and motivate your employees by offering share schemes. You’ll not only create a sense of ownership and loyalty but also enjoy a corporation tax deduction. It’s like casting a charm to keep your team enchanted!
13. Claim All Available Loss Reliefs: Transform Losses into Tax Savings
Don’t let losses go to waste. Make sure you claim all available loss reliefs, including carrying losses back to previous years, carrying them forward, or even surrendering them to a fellow group company. Turn your losses into tax savings!
14. Subscriptions and Training Costs: Spark the Magic of Skill Development
Invest in your team’s growth and development by paying for training and subscriptions. These costs can be tax-deductible for your business, resulting in tax-free skill enhancement.
15. Pay for a Staff Party or Event: Cast a Tax-Free Celebration Spell
Throw a staff party or event and enjoy tax-free costs of up to £150 per head. It’s a great way to boost morale, build team spirit, and create a tax-efficient celebration that leaves everyone smiling!
Conclusion:
Reducing your corporation tax liability doesn’t have to be a daunting quest. With these 15 magical tips, you can become the master of tax efficiency and save your business from the clutches of high tax bills. Remember, always consult with your trusted tax advisor to ensure you’re on the right magical path and compliant with the latest regulations. Now, go forth and conjure some tax savings!
Disclaimer: The information provided in this article is for entertainment purposes only and should not be considered as professional tax advice. Remember to consult with a qualified tax advisor or wizard before implementing any tax strategies. Magic spells may not work on HMRC.
