AR Tax Accountants

Quick tax tips 2020

Quick tax tips 2020

Get more than one bank account.

Aldermore and Virgin Money are becoming increasingly popular as a result of their business saving accounts. Holding your funds across multiple banks could even help you to maximize the amount of compensation that you could claim in the event that multiple banks fail or go into liquidation.

Why you should set up a personal tax account.

Setting up a personal tax account is quick and easy. Best of all, it will help you to keep an eye on the number of qualifying years that you have registered for state pension purposes as well as allowing you to benefit from tax-free childcare, updating tax codes, downloading SA302’s for mortgage purposes, etc.

Why you should be claiming child benefit.

Even if you or your partner do not qualify to keep child benefit due to one person’s income exceeding £60,000, the general advice is to continue to claim child benefit in order to ensure that the non-working parent registers a qualifying year for state pension purposes. This tax benefit protects the non-working parent while they are looking after their child up to the age of 11 years old. If the higher-earning parent earns between £50,001 – £59,999 only some of the child benefit received needs to be repaid (rather than all the child benefit needing to be repaid).

Pension contribution tip

Pension contributions can be particularly tax effective if you are inside of IR35 or close to retirement. This is because an employer pension contribution direct from your company into your personal pension scheme qualifies for tax relief and 25% of your pension fund can be withdrawn as a tax-free lump sum when you get to 55 years old. Therefore you can save tax on the contribution into the pension scheme and save additional tax when you are eventually allowed to start withdrawing money from the pension fund. It is also worth noting that your company can pay up to £500 as an allowable business expense for you to receive relevant pensions advice from a qualified IFA.

Benefits that the HMRC allow through your Limited Company

There are many benefits that HMRC are happy for you to pay for using your limited company. HMRC have published an up-to-date list here. Some of the more popular benefits include pension contributions, mobile phone, office equipment at your home, stationery, travel expenses, additional household costs from home working, health screening, medical check-ups, incidental overnight expenses, training, trivial gifts, and Christmas or other annual parties.

… Including trivial gifts

If you are going on a shopping spree and manage to spend less than £50 on a treat for yourself don’t forget to claim this through your limited company as an allowable expense due to HMRC’s trivial gifts rule.

Gifting shares to your spouse

HMRC have confirmed that gifting normal ordinary shares to a spouse who is working as a director full time is not a problem from a tax point of view. Please see their examples here. However if you are not using normal ordinary shares (i.e. you are using different classes of shares with different rights) HMRC could potentially attack this arrangement under their settlements legislation.

Entrepreneurs relief explained

Entrepreneurs’ relief (ER) is a tax relief that certain shareholders can claim when they come to close their company. It is a very popular tax relief as the 10% tax rate is very attractive compared with large dividends that would generally be taxed at 32.5%, 38.1% or 55% depending on the taxpayers marginal tax rate. In order to take advantage of ER the shareholder should have worked for the company (either as an employee or company officer) for at least 2 years before closure, held at least 5% of the ordinary share capital for at least 2 years before closure, and the company must have also performed a qualifying trade such as consultancy or contracting. 

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AR Tax Accountants

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The above information is just for guidance purposes only and is not a substitute for professional advice and consulting the legislation.

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