For any business, revenue generation is an important aspect and one of the strongest pillars to function your business smoothly. Revenue generation depends on many factors such as taxes, raw material expenses, regular costs incurred and many more.
Tax saving is one of the essential factors, can be considered and reduced strategically. Money saved on taxes is one of the approaches to gain maximum profits.
How to Save Tax Money
Here are a few tax-saving tips to increase your business profits and to make you aware of the various tax-saving techniques.
Tax efficient ways to take out money from your business
Tax saving plays a vital role in the revenues of any business. In the case of a limited company, you can takeout money in the form of dividends and salary.
Buying a rental property
Buying a rental property by taking out a mortgage can get you a 20% tax credit claim on your mortgage interest.
Investing the right way
Tax planning should be done before the fiscal year ends. If you are planning to invest in an asset such as car, tools, etc., consider the right time to buy it.
Purchasing in before the business year-end can be more beneficial than to purchase it after the year-end as you have more time to pay your taxes. Buying an asset at the right time is a good approach for tax saving.
Nature of business
It is imperative to decide the nature of the business. Some business may have flourished on becoming a company which might not be the case with others.
Out of all the options of a limited liability partnership, sole trader and other options, the business has to decide its suitability to function smoothly.
Futuristic thinking makes business work smoothly. The initial planning is the bases of a business which should be done keeping every aspect in mind.
To avoid taxman taking the significant chunk of our revenue, plan things in a way wherein the major share should be in your pocket rather than going into the tax deduction.
Additional tax saving
Extra tax relief can be an option irrespective of the purchase time of the property.
Employer savings are a great way to go for tax saving as they are tax-deductible. As per the new law amendments, employer’s contribution to the pension scheme is mandatory and can substantiate savings for both, employer and the employee.
When you make employer’s contributions to your pension scheme from your gross pay the government provides tax relief with a free retirement bonus for saving in the form of a top-up in your pension.
There are two main types of the tax credit- Child tax credits and Working tax credits. These tax credits provide a monetary incentive to people who are looking after disabled workers, children and other low-income workers.
In the case of Universal Credit being already received, you are not eligible to claim tax credits.
Another way to reduce your table income is to carry forward your annual loss and counterbalance with the following year profits.
If you are using the same car in your personal life that you use in your business, you can claim the cost of a specific proportion of your total cost. If you are using a separate car for your business, then you can claim the running costs.
Either you can claim a fixed amount as your mileage allowance, or you can calculate business miles as a fixed percentage of your total car expenses.
It is always advisable to consult before going for tax deduction schemes. You should always consult your accountant to avoid any confusion in claiming for a tax deduction.
Delaying the process of dividend declaration is another tax-saving strategy. If you have exhausted the limit for your tax rate in the current year, by delaying the dividend declaration you can save some amount up until the next year.
Financial stability – a Conclusion
In today’s times, it is challenging to set up your own business and run it smoothly without any hurdles. Financial problem is one of the most significant hurdles being faced by many entrepreneurs.
To cater to this businesses’ need, many private lenders and banks have come to their rescue by providing the loan facilities. This facility is offered under many categories like “personal loans”, “car loans”, “loans for bad credit no guarantor history business” and many more.
Many of these loans are unsecured and require no guarantor. They are accessible to almost everybody, therefore making things easier relating to the financial aspect.
Once the business is set up, you can follow the above tips for tax saving to increase your business profits.