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Effective tax planning is essential if you are to minimise your tax bills. Simple tax planning can significantly reduce your tax liabilities.
The self-assessment tax return is an unavoidable burden if you are liable for self-employed tax or have complicated income tax affairs.
Corporation tax is charged on a company's profits. If you trade as a limited company, ensure that paying this tax is as painless as possible.
National Insurance Contributions (NICs) are payable whether you are self-employed or employed by your own company, although different rates apply.
As well as your legal obligations, you’ll want to ensure that payroll is painless and that you use any opportunities to improve your tax-efficiency.
Effective VAT planning aims to ensure that VAT is relatively painless, and that you are reclaiming as much as possible of the VAT you pay.
Capital gains are made when you sell something for more money than you paid for it. As a result, you can be subject to tax. Take professional advice.
Business property taxes apply to businesses with commercial premises.There are two commercial property taxes: business rates and stamp duty land tax.
If you have tax problems or face a tax investigation, it pays to seek professional advice and you must act rather than just hoping for the best.
Company cars are a common employee benefit, despite UK company car tax being substantial. Special company car tax rules also affect the employer's tax position.
Both employer and employee should take the cost of company car tax into account when deciding whether to provide company cars and how to deal with the cost of fuel.
Employees pay company car tax based on the list price of the car, its emissions and type of fuel. The list price is multiplied by a percentage (based on the emissions and fuel type) to work out the value of the company car tax benefit that is subject to income tax.
The percentage varies between 9% and 37% based on emissions, with the lowest rates for the least polluting vehicles. Vans are also subject to company car tax if there is any private use other than simply driving between home and work. Van drivers are taxed on a flat £3,230 benefit.
There are few exceptions. Company car tax is not charged on pool cars or company cars used exclusively for business.
An employer can reimburse an employee for the cost of fuel used for business travel or they can use a mileage rate. If the employee is reimbursed using the HM Revenue & Customs advisory fuel rates, there are no tax implications. Advisory fuel rates are published four times a year, based on petrol prices and the average fuel efficiencies of cars grouped by engine size.
Higher mileage rates must be justified or a liability to tax and National Insurance contributions will arise.
If fuel is also provided for private use, there is an additional company car tax on this extra benefit. The value of the car fuel benefit is calculated as the fuel benefit multiplier multiplied by the same percentage as used for the company car tax. For vans, the taxable fuel benefit is set at a flat rate.
Employers pay Class 1A National Insurance contributions on the taxable value of the company car tax benefit and the company car fuel benefit.
The capital allowances available for company car purchases depend on the car's level of emissions. The higher the emission, the more you pay. For emissions below 75g/km, there is a 100% first year allowance. The first year allowance emissions threshold will fall to 50g/km from April 2018.
Company cars purchased by the self-employed are treated differently. Unless the car is exclusively used for business, the allowances you can claim are reduced in proportion to the level of private use.
If a company car is leased, the full lease costs are an allowable expense for emissions below 130g/km. Otherwise, only some of the costs are allowable.
VAT can be recovered on business fuel only. If you provide fuel for private use and want to reclaim VAT on all the fuel purchased, you must pay a fuel scale charge - again, based on the level of emissions. VAT can only be recovered on purchases if the car is exclusively for business use. 50% of the VAT on leasing company cars can be recovered, or 100% if the car is exclusively for business use.
Company car tax may mean that it is more tax-effective for employees to use their own cars and be reimbursed. You can pay up to HMRC's approved mileage rate (45p per mile for the first 10,000 miles and 25p per mile thereafter) without any tax or National Insurance being due.
If you are going to provide a company car, clearly a low-emissions vehicle is more tax-efficient. The value of the benefit is increased by including additional non-taxable extras: maintenance, servicing and repairs; Vehicle Excise Duty (commonly referred to as 'road tax'); and insurance.
The way VED is calculated has changed. Cars registered before 1 April 2017 continue to pay VED under the previous system. VED rates for new cars purchased on or after 1 April 2017 are based on CO2 emissions - varying from £0 to £2,000 for the first year of ownership. For subsequent years, those cars will be charged a flat rate ranging from £0 to £140 per year - regardless of CO2 emissions depending on the type of vehicle. There is also be an additional supplement of £310 per year for the first five years of ownership for cars costing in excess of £40,000.
Think carefully about whether it is worth providing fuel for private use. The tax can easily outweigh the value of this benefit for the employee, while the cost to the business of paying for the fuel can make this an expensive benefit to offer.
It's worth taking advice on the full tax implications of offering company cars and whether to lease or buy - the rules become stricter year-on-year to encourage businesses and individuals to buy and drive more environmentally-friendly cars.