How Do You Save Paying National Insurance ?

Posted by: on Aug 25, 2012 | No Comments

I was reflecting on what work I had done this week and thought it would be useful to pass on a client scenario I researched this week.

A private client who is employed as a company director at a medium sized company changed employer last year. He earned above the higher rate tax band in both companies. Directors often pay national insurance contributions (NIC) cumulatively so potentially 12% employee national insurance paid in the basic rate tax band at both companies. I investigated whether we could get him a NIC rebate and concluded that if the second employer pays NIC on a cumulative basis you can send a letter to HM Revenue & Customs (HMRC) to request a rebate.

That lead me to thinking of the other potential savings you can make on national insurance contributions:

If you have two or more jobs during the tax year ending 5th April 2013 you can earn approx £7,500 in each job before you pay NIC;

If you have a job and are self employed during the tax year ending 5th April 2013 you can earn approx £7,600 before you pay class4 NIC on the self employment (plus the approx £7,500 in the job before you pay NIC);

If you earn less than £5,564 profits from self employment in the tax year ending 5th April 2013 you can write to HMRC to get a rebate of your class 2 NIC;

If you are employed and self employed in the same tax year and are a higher rate taxpayer it is likely that you can get a rebate of Class4 NIC;

If you are a Director/Shareholder of a small Limited Company you can pay no Tax and no NIC up to the NIC personal allowance and pay no NIC on dividends. There are a lot of other factors affecting your decision to set up a Limited Company and you can refer to my other blog for that.

As always Sir Tax Accountants in the Camberley area will do everything we can help to reduce your taxes so feel free to contact me if you require any clarification of the above on 01276 451465, mike@sirtax.co.uk

Do You Want to Save Tax ?

Posted by: on Jul 6, 2012 | No Comments

The press have had a field day over the Prime Ministers personal attack on Jimmy Carr over legally saving tax. You will have to decide for yourself whether you think it is morally wrong or not. You also will have to decide yourself whether the HMRC tax settlements with big companies like Vodafone is morally acceptable or not. Mr Cameron is not shouting too much about that is he ? And he refused to comment on Take That star Gary Barlow’s tax affairs – saying it was a different case. It puts a whole new slant on the phrase ‘Take That’.

So what should small business owners do to legally save tax ? If you start a business from scratch it is often a good idea to to start as a sole trader to prove your business concept and have the flexibility of self employment until you have established your business foundations. When you are confident of the resilience of your business you should consider the tax saving possible through converting to a Limited Company. I usually suggest that sole traders consider incorporation after reaching profits in excess of £30,000 (dependant on your circumstances). Various factors can influence the timing of your incorporation, eg do you use a registered childminder hence qualify for childcare vouchers, or would you benefit from a company pension, etc. Before you decide to go ahead with incorportion you should consider the pro & cons. See my earlier blog re the pro & cons of incorporation.

Have you got a family member who could make a contibution to business, and hence pay them wages and/or give them some company shares. Could you use company resources to develop products or process such that you qualify for research and development tax credits ? This can offer very attractive tax incentives. High end TV and computer game designers can also also benefit from tax breaks introduced in the budget. Make sure you consult with your accountant to benefit from these and other more advanced tax strategies.

Sir Tax Accountants of course support all legal methods of saving tax. We will help business owners in Camberley and surrounding areas review your business processes and marketing strategies to grow your business profits. After all the higher your profits the more opportunities there are for tax savings.

Will Higher Rate Tax Relief on pensions be removed ?

Posted by: on Nov 11, 2011 | No Comments

There is increasing speculation that the government is considering removing higher rate tax relief on pensions.  We can’t be sure whether this will happen, but may it be announced in the 29th November 2011 Autumn Statement.   Last time the government changed pension tax relief, the changes took place with immediate effect, giving pension investors no time to act.

If you are a higher rate taxpayer you may want to consider doing so before 29 Nov 2011.  Personal Pensions are one of the most tax efficient ways to save for retirement. Tax relief is given at up to your highest rate. For taxpayer in the highest rate 50% tax band, £10,000 invested in a pension could cost as little as £5,000. For a 40% rate taxpayer £10,000 invested in a pension could cost as little as £6,000. Currently you to take up to 25% as a tax free lump sum from age 55.

Of course we can not be sure that the higher rate of tax relief will disappear on the 29th Nov, but if you were planning to make a pension contribution this tax year, and have the cash flow available, early action may be of benefit.

Taxpayers can contribute up to £50,000 per year, and there are special rules which allow you to invest more if you have not used up all of the prior year allowances.

Sir Tax Accountants Camberley continue to look for way to reduce clients tax liability. Please feel free to contact us if you require further information 01276 451465.

Sole Traders – Consider 45p per mile

Posted by: on Oct 26, 2011 | No Comments

Are you are a sole trader and have turnover below the VAT threshold (currently £77,000) ?

If the answer to that question is yes then next time you purchase a car for business use you should consider the tax benefits of claiming 45p a mile instead of claiming the usual fuel, insurance, servicing, road tax, etc expenses and capital allowances.

When you cannot claim Vat on the fuel you use, in many cases recording your business miles and claiming 45p a mile is more tax efficient than claiming all of your expenses.

If in doubt contact your accountant for a more detailed assessment.

Sir Tax accountants in Camberley are proactive in looking for ways to reduce you tax liability. Contact Mike@SirTax.co.uk 01276 451465

If You Want to Save Tax – Get the Basics Right First

Posted by: on Nov 1, 2010 | No Comments

It is amazing how many businesses put at risk their tax allowable expenses by simply losing invoices and receipts. Where invoices and receipts are missing HMRC may disallow the relevant expenses. HMRC tax penalties have been significantly increased in recent times, at worse case penalties up to 100% of the value of tax avoided.

Accountants can help by making estimates of expenditure based on industry standards. Under these circumstances a disclosure is usually made in the white space on the tax return which may increase the chance of an enquiry.

All business owners and staff should locate a box file, folder, or even just a large envelope in a prominent position in the office such that when opening the post, or returning from a business trip all invoices, receipts, and bank statements are stored safely ready for bookkeeping and filing.

I know this is really basic stuff but please help us help you claim all of your tax allowances.