So you finally decide to capture the pitch and become a dedicated director of your own limited company. Here, the first thing that you are required to do is to bring your company into existence.
Reading our previous blog on How to Set up a Limited Company in the UK can help you in good preparation and planning of different functions that are needed to be determined before initiating the registration process. However, we tried to sum up the entire process in the following list of activities, which you can keep as a reminder of your company’s registration process.
- Deciding Appropriate Name of the company
- Registering your company through online, post or agent
- Informing HMRC
- Opening a Business Bank Account
- Company Set –Up and determining Tax
As you move ahead in your business, trade your products and services, and achieve good profits. You will realize that tax can diminish your gains up to 30% at the year-end. Probably there is no chance of avoiding tax, but being a limited company you can have certain monetary benefits from tax planning activities during the year. Here, we present 4 simple guidelines for Tax Savings –
1. Director’s Salary:
Director’s salary is the simplest trick adopted by Limited Companies for saving tax. Being a holder of the company, you are completely authorized to take profit from a company in the pre-determined ratio. Replacing your share of dividend with the Salary can help you in saving tax under allowable expenses for the private limited company.
2. Startup and Preliminary Expenses:
It refers to the expenses incurred while incorporation of a company. There are certain expenses like printing costs, fees, charges for drafting MOA and AOA, stamp duty, etc, which are incurred by founder, before and after the incorporation of a private limited company.
3. Capitalizing Assets:
Capitalizing capital assets can help a company to record these assets on the balance sheet instead of an income statement, which means it is more an expenditure. You can count depreciation on such capitalized assets and acquire tax benefits for years.
4. Salary to Family Members:
While initiating business operations, you may typically seek guidance from family and friends. Some of your family members and friends can help you ever after in your business without charging you any fees. But you can count the salary in your books as an expense for taking advantage of tax benefits.
Hence, you can save maximum out of your company’s 30% tax, just by implementing the above tricks and tactics. Keep checking the proper documentation and recording of the above expenses so that you can properly present all documents and claim the tax benefits.