Choosing to start your own business can be a daunting task, requiring a substantial investment of money. Whether it’s a small business or just a freelancing, any amount of savings can make a huge difference in the health of your finances. When it comes to taxes, there are a variety of ways in which to save money. Each individual saving may seem fairly insignificant on their own, but when combined together over a period of time, they can become substantial.
The actual process of registering with HMRC can provide various opportunities to save money, or at least to not lose money unnecessarily. Obviously, registering as self-employed in itself is incredibly important as failure to do so can lead to expensive and completely avoidable fines.
It’s also important to register correctly as there are different ways in which to be self-employed. For example, if you are self-employed and do not work for customers, then this needs to be noted when you register. This also applies to those who have a limited company or are in a joint partnership. If HMRC does not know your exact circumstances, it can lead to you paying more tax then you should.
Registering as self-employed can be complicated, but HMRC are always on hand to help anyone through the process. When in doubt- get in touch.
Know the Rules
There are many rules, guidelines and regulations when it comes to paying tax but being informed on the overall system can make a huge difference when it comes to saving money. For example, each person has a personal allowance of £12,500, meaning they can earn up to this amount before paying tax. With this in mind, you could employ a family member and pay them up to this amount, reducing the amount of tax you have to pay overall. It is worth noting, however, that you need to inform HMRC of the situation and there needs to be a clear outline of how they are employed and their duties.
Bookkeeping can be time-consuming and arduous but not only is it required should HMRC ask for any evidence, it can also help you to save money. Obviously, if HMRC conducts an investigation and you don’t have the relevant evidence due to poor bookmaking, this can lead to unnecessary fines. Good bookkeeping also allows you to save in other areas, for example, having detailed information on any expenses you can claim back.
When you are self-employed you are able to deduct specific running costs from your taxable profit, therefore reducing the overall amount you pay in taxes- these are expenses. There are a wide variety of different expenses which you can claim back. These include the cost of running your work premises, travel, staff, uniform, to name a few. The full list can be found on the HRMC website, with specific details on what counts as a work expense and what doesn’t. It’s also worth noting that those who run a limited company have different rules to follow.
Although expenses may not seem significant at first, as they add up, the overall saving can be substantial. This is especially true as the business grows, and factors such as staff and premises become pertinent.
Work with an Accountant
The tax system can be complex, and calculating allowances, expenses, and taxable profit can be confusing. Sometimes the best way to save money is by investing, and accountants can be invaluable investments. Accountants are trained within this area and can work with you to ensure you get the best deal possible when paying taxes, whilst also following all the relevant regulations.