From April 2023 onwards, the main rate of Corporation Tax will rise from 19% to 25% for a company’s taxable profits over £250,000, with a marginal rate between £50,000 and £250,000. It is important a company makes use of some handy tax saving tips to help minimise the corporation tax liability due, which I have detailed below as follows;
Invest in Capital Equipment
By investing in Capital Equipment, companies can utilise the ‘Annual Investment Allowance’ (AIA), which allows a business to claim tax relief on purchases of certain assets. From April 2023, the government has announced a permanent increase of AIA to £1 million.
Increase Director’s Salaries
Company owner/directors should be utilising their personal tax allowance effectively. This means drawing a tax efficient combination of salary and dividends from the business. With the increase of Corporation Tax rates, it may be worthwhile increasing the Director’s salary to avoid higher Corporation Tax charges.
Increase Pension Contributions
Companies can obtain a deduction from their profits for pension contributions paid into pension schemes on behalf of employees or directors, and payments must be made before the end of the accounting period.
Claiming Business Mileage
If an employee uses their personal car for business, they can claim business mileage expenses which is tax deductible using the following statutory rates;
- Up to 10,000 miles – 45p per mile
- Over 10,000 miles – 25p per mile
Utilise the ‘Work from Home’ allowance
HMRC will allow you to claim a portion of your home expenses to meet the additional costs of heating and lighting the work area, along with telephone/internet access and insurance costs. You can either calculate this by using a portion of total household costs or alternatively claim the HMRC approved rate of £6 per week. Direct Peak customers are able to fill in a ‘use of home’ calculator to accurately estimate the portion of home office costs.
Trivial Benefits
Trivial Benefits are a tax-free allowance to ‘gift’ to your employees which are tax deductible for companies if all of the following apply;
- It cost you £50 or less to provide
- It isn’t cash or a cash voucher
- It isn’t a reward for their work or performance
- It isn’t in the terms of their contract
You cannot receive trivial benefits worth more than £300 in a tax year if you’re a director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.
Utilising Entertainment costs for Staff
Costs of entertainment for a staff social function can be tax free for the employees and tax deductible for the company, provided the following apply;
- The event must be open to all employees
- Be annual, such as a Christmas party or summer barbecue
- Cost £150 or less per person
These rules also apply to online or virtual parties, and can be spread over multiple annual events, as long as the combined cost of the events is no more than £150 per head, they are still exempt.
Claim R&D tax relief
If your company is developing new or improved processes, products or software, it may be eligible for Research and Development tax relief, which could reduce your corporation tax liability by around £25,000 for every £100,000 spent innovating.
Direct Peak are on hand to help our clients save as much corporation tax in 2023 and beyond, get in contact with us today to discuss the next steps in your business and how we can help you save as much corporation tax as possible!
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UK Taxation
The UK government utilises various taxes to generate revenue and fund public services. Here are some of the main taxes in the UK:
- Income Tax: This tax is levied on individuals’ income, including employment income, rental income, and some forms of investment income. Income tax rates are progressive, meaning that higher-income individuals pay a higher percentage of their income as tax.
- National Insurance Contributions (NICs): NICs are contributions made by both employees and employers to fund social security benefits, including state pensions, unemployment benefits, and healthcare services.
- Value Added Tax (VAT): VAT is a consumption tax levied on most goods and services. The standard rate of VAT is 20% for most items, but certain goods and services may be subject to reduced rates (5% or 0%), or they may be exempt.
- Corporation Tax: This tax is imposed on the profits of limited companies and organizations. It is calculated based on the company’s taxable profits and is subject to the prevailing corporation tax rate.
- Capital Gains Tax: This tax is applicable when individuals or businesses sell or dispose of assets that have increased in value. The tax is imposed on the capital gain realised from the sale or disposal of the asset.
- Inheritance Tax: Inheritance tax is payable on the estate (including money, property, and possessions) of a deceased person. It is generally levied if the total value of the estate exceeds a certain threshold.
- Stamp Duty: Stamp duty is a tax imposed on the purchase of property, shares, and certain other assets. The rates and thresholds vary depending on the type of asset and the value of the transaction.
- Fuel Duty: Fuel duty is a tax on the purchase of petrol and diesel fuel. It is applied per litre and helps fund transportation infrastructure and services.
- Council Tax: Council tax is a local tax imposed by local authorities (councils) to fund local services such as garbage collection, street cleaning, and local infrastructure.
It’s important to note that tax rates, thresholds, and regulations may change over time, so it is advisable to consult official sources or seek professional advice for the most up-to-date and accurate information on taxes in the UK.
