We have small business, how can we reduce our tax?

Question

We have very little expenses, use our personal for the business. We like to buy a business car, any pros & cons? Also we pay tax approx £11k each year. We are wondering if can save this money in buying assets (property), shares in other companies, loans to other business. Help required?

sorry we use personal car for the business. can we make investments to defer tax

Answer 1

Assets are definitely part of the owner's equity and a fine way to reduce income tax. I'm not sure what you mean by we "use our personal for the business" but you should have clear cut definite lines between personal and business. If you get a car for the business, you have to differentiate between personal use and business use. If you take it to the store occasionally for personal use, you cannot write off 100% of the vehicle and costs associated with it. Actually, it works that way with anything the business may buy. Shares in other companies might be a great way to go. There would be no doubt as to who the owner was. I use to own my own business and wrote off all kinds of stuff as a business expense. Computers, paper, pens, trash cans, you name it! Casual labor is another good one! Good luck with that!

Answer 2

In the UK you cannot get a tax deduction for buying shares or other investments.

You can't get a 100% deduction up front for buying assets to be used in the business. Instead you will get Capital Allowances - the rate will depend on how large your business is and what sort of things you buy.

You could consider making pension contributions, as these are tax-deductible. If you are a company, you would need to pay these before your year-end in order to get a tax deduction in that year.

Any revenue expenditure will reduce your profits and therefore your tax. Pay your staff more, move into a more expensive premises, buy nicer stationery...

But the thing to keep in mind is that all of these things are deductions from your income, not deductions from your tax. For instance (say a tax rate of 25% to keep the numbers simple):

Income = 1,000
Tax at 25% on 1,000 = 250

Compared with:

Income 1,000 less pension contribution of 200 = 800
Tax at 25% on 800 = 200

You see you have spent £200 of real money in order to save £50 of tax. So you should only do this if it's money well spent.

No idea about the car, sorry, not my area.

Answer 3

Don't know about British tax laws,her in the U.S.,you should keep you personal expenses separate from your business expenses.
A car for business depends on how much traveling you do for business purposes. If you do a lot, you can claim the cost of the vehicle,fuel used, fees,etc. If you don't do a lot of traveling,you might use your personal car,but keep track of the bossiness use miles and fuel used. Property taxes for bus sines and residential property are taxed differently unless you work from home. You would need to talk to a tax professional for specific information.

Answer 4

Yes you can always do those things to reduce your tax bill
but you will need to show the tax man ie assets like property..shares in companies or what ever you spent the money on ..you will need to keep records of there value..loans to will need to be recorded and interest made on loans will be on record..all these eventually will be making profit ..you will be paying tax on them
there is no way you can escape the tax man for long ...other then stealing from the company some way

Answer 5

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Answer 6

Get a good accountant ,ask other small traders who they use.You many become unstuck trying to work the system yourself a professional will know the best course of action

Answer 7

You can offset certain expenditure against your income but it might be better to consult a tax consultant to clarify your position. They shouldn't charge you more the a few hundred pounds but their advice will be worth it!

Answer 8

you need to offset all your business expenditure against your income - be that office stationary, computing equipment etc.

Answer 9

contary to last answe u should not defrenchiate between buisness use & ur use, that way u can claim back more VAT