24 Tips and Treats to Help You and Your Business – Part 1

by | Jan 14, 2022 | Uncategorized

At the end of last year, we here at Mayflower Accountancy decided to countdown to Christmas over on our Instagram page. In our 24 days until Christmas countdown, we gave you some top tips and treats to help you and your business thrive.

In the next three articles, we will be going into these 24 tips in more depth. Below you will find part one, including eight tips from us to you.

Tip 1 – Party on HMRC

What better place to start than with a gift from HMRC to your business? If you run a business then you are able to host a party for your employees and can get £150 per head with a lovely tax free benefit! It cannot exceed more than £150 per head, including VAT, and must be to entertain staff and be open for everyone – not just the Directors.

You can claim back VAT and the whole expense is allowable too. Even though we’ve had another resurgence of COVID-19, the better news is that the £150 can be split across functions, so you can host a party in the summer if you’d prefer.

Tip 2 – Take £2,000 out of your business tax-free as a dividend

If you run a limited company then this one is for you. As a shareholder, did you know that the first £2,000 you take out of your business is 0% tax – i.e. is completely tax free?

All you need to do is make sure the company has enough profits, otherwise known as retained earnings or reserves, to fund it. Do check your sums with this one though. You have to ensure you’ve not taken dividends out already and double check with your accountant to make sure you get this before the end of the tax year if you can.

Tip 3 – Rent a room and get tax free income

Have you got a spare room in your house? Do you fancy up to £7,500 of tax free cash? The Rent-a-Room scheme is a really easy way to earn an extra bit of cash that HMRC can’t touch.

All you need to do is provide a furnished room for someone to stay in and be living in the property with them at the same time, as your main home. Surprisingly, you don’t even have to own the home! As long as your landlord allows it, you can rent your home and bring a lodger in to take advantage of this perk.

The benefit is halved if you let out a room jointly and you can’t claim expenses for things like wear and tear. Make sure to do your maths as ever with this one to see if it’s worth it.

Tip 4 – Pop cash into a pension

If you want to save a lot of money on tax whilst also making sure your retirement is comfortable we have one word for you – pension! Putting cash into a pension can give you a basic rate relief, so you will receive £25 for every £100 you pay in. This grows if you are a higher rate taxpayer.

Those who own a limited company means you can make company contributions to reduce your corporation tax as well as putting money into your pension. If you’re sitting on high profits, putting money into your pension pot will save you on a hefty tax bill. As with everything, seek out professional financial advice and don’t forget your annual and lifetime allowances.

Tip 5 – Check your tax code

Are you paying the right amount of tax? If you’re employed, then take a look at your tax code. The default is 1257L and that means you get the full allowance.

But HMRC may change this code if they think your circumstances are wrong. Things like company cars or having multiple jobs can cause it to do funny things. Take a look at your code and if it looks low, give HMRC a call and ask them to explain your code to you.

If HMRC decide to lower your code then your employer should be notified and you may find yourself with a nice little tax rebate in your next pay packet. Think you’ve paid too much by the end of the tax year? Keep all of your P60s, P11ds and P45s to hand, calculate what you think you should have paid and if it’s too much, there are ways you can reclaim that tax.

Tip 6 – What’s nicer than an ISA?

ISAs are a brilliant way to save on tax. If you have received a decent bonus or have cash in your pocket, you might want to do something with it, so it starts to earn you some money. An ISA is a way of making that cash work for you and growing it, either through cash or riskier (but possibly more rewarding) stocks and shares.

What’s so great about ISAs is that everything that grows in it cannot be touched by HMRC. Whereas if you bought and sold shares normally you might have capital gains to pay and if you earned interest income then that could be taxed too.

You have a £20,000 allowance and you can’t carry this forward so you either need to use it or lose it. A health warning for those looking at stocks and shares – get proper advice and remember that the value of your investment can go down as well as up.

Tip 7 – Share your capital gains tax allowances

If you are married or in a civil partnership, you can do something very cool – transfer your assets to a spouse at any time with no gain or loss. Why is this cool? Because if you ever want to dispose of that asset and you’ll likely make a gain of that, you get to share the love (and the tax) and usually save a shed load of cash.

How does it work? Well, each of you gets a capital gains tax allowance of £12,300. By getting your spouse involved you can use their allowance too, doubling that to £24,600. Furthermore, because the profit is halved there is more of a chance you’ll have more tax in those lower rates of 10% (or 18% for property) than if you sold it solo.

Finally, this allowance is very much a use it or lose it deal too. If you have a few things you want to sell, dispose of them by the 5th of April and your brand new shiny allowance will be available once again on the sixth.

Tip 8 – Treat your clients – just brand it and keep it small

Why don’t you treat your clients and thank them for their business? But isn’t this not an allowance as it’s classed as business entertainment? Correct, but you can class this as advertising if you do the following three things:

  1. Brand the gift in your company’s branding – make sure it’s nice and clear.
  2. The gift can’t be worth more than £50, nor can you gift the same person a number of gifts that are worth more than £50 collectively.
  3. It cannot be food, drink, tobacco or an exchangeable voucher.

So there you have it. Celebrate your brand, thank your clients and get a bit of tax relief.

That’s it for part one of our three part series. Make sure to keep your eyes peeled next week for eight more business tips and treats from us here at Mayflower Accountancy.

Ready to start the journey?

To get help with your accounts and start freeing up your time to focus on growth, talk to the Mayflower team today.

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