Thinking About Tax Avoidance? Think Again. Here are Legitimate Ways to Pay Less Tax

Organize Great Business Events

Paying tax is a burden, but as it or not, you have to pay it. It is the law. Tax avoidance is a serious crime and comes with heavy penalties. As a business owner, you have a serious responsibility towards paying your taxes. The onus is very much on you to ensure that you, and your employees are paying the right amounts of tax. Tax evasion is a serious crime, and you could put yourself and your employees at risk if you do not follow the correct procedures. Naturally, everyone wants to pay less tax and a good accountant will find the relevant loopholes in order to help you avoid paying as much tax. However, there is a fine line between finding loopholes and evading paying tax.

taxes 300x225 Thinking About Tax Avoidance? Think Again. Here are Legitimate Ways to Pay Less TaxImage is courtesy of Images Money

There are many ways that the government encourages us to pay less tax, in the form of ISA’s and private Pensions. These are legitimate ways of avoiding paying as much tax. Even the term ‘avoiding’ seems a little crude. As long as you are legally paying what you should be, in terms of tax, then you will be fine. Sadly, these rules have been abused repeatedly, meaning that the average person now faces serious penalties due to this abuse. Tax evasion is not quite the victimless crime that we perceive it to be. It costs the taxpayer, meaning me and you, roughly £4bn per year to recoup the costs of tax avoidance.  Should you want more information on laws and legalities regarding tax issues, take a look at Lexis Nexis Australia.

 

As a business owner, there are some great ways that you can pay less tax, legally. These are not abuses of the system either. These are some of the most common, and legal, ways to pay less tax:

Tax Deductible Expenses

If you have purchased an item that is critical to your business, you may be entitled to claim some of the money back and have you tax bill reduced in the process. Things like travel and accommodation, heating, lighting, cleaning bills, water rates, rent and general maintenance can all be claimed against resulting in you paying less in taxes.

A Company Car

Treating yourself to a new car may be considered a luxury, and not a savvy purchase. However by investing in a car that is more cost efficient it means that you not only save money, but you can also claim money for the costs of running a car. Claiming against using your car seems fairly sensible, but remember not abuse the perks.

Cash Flow Boost for the Self Employed

In short, you may be able to improve your overall cash flow and revenue, by choosing an accounting year that ends early in the tax year. So, instead of choosing your tax year to end at the same time as everyone else (April, in case you didn’t know), you could choose for your accounting year to end in December. This maximises the delay between earning your profits and your final tax demand.

Annual Losses

No one wants to hear the phrase ‘annual losses’ but it is imperative that we discuss them. Did you know that you can carry forward losses from one year and offset them against profits from the next? It is a perfectly legal way of paying less tax, yet so many people seem to be unaware of this fact.

Payments on Account

Should you expect to earn less in the next year then you did the year before, apply to reduce any payments on account that the Tax Man asks you to make. You could save yourself a small fortune. Similarly, in today’s uneasy economic climate, this may be a sensible route to take.

Consider an ISA

There are some serious perks associated with an ISA, and is a legitimate way to pay less tax too. Should you have any savings or investments, then you need to seriously consider investing in an ISA. ISA’s are not as complicated as one may believe, so it is important to research this legitimate way of avoiding paying as much tax. As long as you are a UK resident and are aged over 16, then you can open an ISA account. Do bear in mind that you cannot open a joint ISA if you have a business partner, nor can you open one on behalf of someone else. This is very much a lone venture should you decide to invest your coffers in one.

In short, cash ISA’s are savings accounts where the interest that you gain is not taxed. This means that it is rare for a normal savings account, or current account, to pay more interest. Take a look at this for size: For a cash ISA paying 2% AER to be beaten, a basic-rate taxpayer would need a savings account offering 2.50%, while anyone paying higher-rate tax would need 3.33%. These accounts currently aren’t out there for the vast majority of people, so if you have your business earnings, invest them wisely. In short, the more money you have, the more money you can make. ISA’s come in all shapes and sizes, so if you are looking at saving money in this type of account, then seek the advice of the bank.

Remember, you can save money on your tax bill in a legitimate and legal way. There are some basic rules to remember when saving money on taxes, to avoid you ending up in serious trouble. If an accountant or financial advisor offers you a tax deal that sounds too good to be true, then it probably is. For example, if your accountant offers you a deal that does not sound ‘normal’ or the returns are out of proportion with economic activity, then the likelihood is you are about to engage in something that is not entirely legal. To be respected within the business world, you need to ensure that you are squeaky clean. After all, you do not want your client’s confidence to be decreased because you have had a brush with the law.

Moving money into various accounts is legitimate as are the number of ways to pay less tax, as previously mentioned. Stick to the rules, and be cautious. You can be better off financially and remain a law abiding citizen too!

You must be logged in to post a comment