Looking to become more tax efficient this year? Gifting shares of your business to your spouse is often recommended by small business accountants and tax advisors, in order to make use of both you and your partner’s tax-free allowances, and ultimately minimise the tax on dividends the company pays. This is a great move to make, however if you’re looking for ways to save even more and you also happen to have a mortgage, your accounting firm may not have told you to consider selling shares instead of gifting them. Here’s what you need to know:
Firstly, why is joint ownership best?
Instead of owning your business alone, it is widely considered good practice to own it jointly with your spouse whenever one of you is paying a higher rate of tax than the other. When you both own shares in the company, you are both entitled to use your tax-free allowances, dividend nil rate band, and other rate bands, in order to reduce the tax paid on your company dividends. Owning with your partner is a great way to become more tax efficient.
Should I have made my spouse a shareholder when I formed the company?
If you’re thinking it’s too late to make your spouse a shareholder in your company, it’s definitely not. Even if your spouse was not made a shareholder in the beginning, HMRC will still allow you to transfer ordinary shares to them as a gift in order to reduce your tax bill. No matter how long ago you formed your business, you can start the process of making your spouse a shareholder at any time.
How does this help reduce my tax bill?
Here’s an example of this tax-saving plan in action:
Joe started his company (Joe Bloggs Ltd.) over ten years ago. It has grown considerably since then, and is now being valued at around £600,000. Joe Bloggs Ltd. pays Joe £100,000 per year in dividends, of which almost £50,000 is taxed at the higher rate, and naturally, Joe would like to save on tax wherever possible.
Joe’s wife, Jane, brings in less income, and so Joe’s accountant suggests that he gift half of the shares of Joe Bloggs Ltd. to Jane, in order to make the most of her tax-free allowances and basic rate band.
Tax savings comparison
If you believe you could qualify for tax relief by implementing the plan above, you can discover the savings you could make in your business by filling in your details on our quick form at the link below, and we’ll send you a free, simple table to help calculate.
You can also get in touch by emailing us to email@example.com or call us 020 3735 5119 at Price & Accountants to discuss how we can help you save on your tax this year. We are committed to helping small businesses in London and around the UK with their accounting needs, using Xero online accounting software and our expert team of advisors, all dedicated to helping your business flourish.
At Price & Accountants, we have worked to overhaul and streamline the financial direction of many SMEs, and over many years of experience we have identified key mistakes that affect businesses more than they realise. This could have a negative impact further down the line on their businesses. Here are the key things that could be preventing your performance:
1. Lack of planning and analysis
Without a strategy in place and a method of analysing what you have done in the past, you are essentially planning to fail. Having a plan for your financial operations and goals is crucial in order to achieve them, and to avoid later complications.
2. Relying solely on year-end accounts
Many businesses use their year-end accounts only to analyse the historic data, however this can also be one of the most beneficial insights into your business, not only telling you what has occurred, but what you need to do next.
3. Oblivious to the metrics in the business
Most businesses we have come across do not know or understand key metrics within their organisation, such as KPIs and ratios. Understanding how to use these information could be vital to your future success.
4. Lack of a cash flow model
Not having or utilising a cash flow model is one of the biggest mistakes we see SMEs make. If you are experiencing cash flow problems (or think that you could be, but are not sure) then we urge you not only to make this a priority, but to reach out to us for a free consultation.
5. Avoiding cloud-based accounting
This is by far the most efficient way to manage your finances, and without it you are undoubtedly wasting time and money, and will often be left searching for answers.
6. Lack of customer analysis
Knowing your target customer and the key financials surrounding their interactions with your business, is not only advised, but could be the difference between your success or failure further down the line.
7. Poor financial productivity
Productivity and performance improvement applies not only to the everyday running of your business, but is also highly relevant to your financial goals. Many businesses waste money on poor productivity and low performance, and this is an area we have helped many clients refine and streamline.
If you feel that your business is suffering from any of the above, feel free to reach out to Price & Accountants for a free coffee and consultation on how we can help:
Call 020 3735 5119
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Limited companies filing deadlines.
Limited companies have filing deadlines for accounts and tax returns.
Penalties (for private limited companies) for late filing with HMRC are summarised below:
- First accounts with Companies House 21 months after date incorporated
- Annual accounts with Companies House 9 months after year end date
- File company tax return with HMRC 12 months after end of accounting
- Pay Corporation Tax or 9 months and 1 day after Corporation
- Tell HMRC that no corp tax is payable Tax accounting period ends
The penalties (for private limited companies) for late filing of limited company accounts with Companies House are summarised as follows:
TIME AFTER DEADLINE PENALTY
- Up to 1 month £150
- 1 to 3 months £375
- 3 to 6 months £750
- More than six months £1,500
The penalty is doubled if annual accounts are late two years in a row.
Limited companies are required to file a confirmation statement (previously an annual return) with Companies House once a year. The company should receive an email alert or a reminder letter when the confirmation statement is due. The due date is usually a year after either:
- the date the company was incorporated
- the date the company filed its previous annual return of confirmation statement.
The company can file the confirmation statement up to 14 days after the due date, with no penalty.
It can be very difficult for a small business owner to understand several deadlines, Price & Accountants can help you to understand of these deadlines. Feel free to book an appointment with us today by completing contact us form or email: firstname.lastname@example.org or call 020 3735 5119