Reduce the contractor corporation tax
It is a tricky concept to reduce the amount of tax you pay. Responsible contractors and business owners want to pay the right amount of tax they owe and of course, they don’t want to pay more. Any contractor and a limited company in the UK must pay contractor corporation tax. This is calculated according to the corporation tax accounting period which is the same as the financial year of the company.
What is corporation tax?
It is the tax that is payable for the profit of the companies based in the UK. Whatever may be the profit, the company has to pay the tax. Regardless of the business size, the companies have to pay the tax. When a new company is registered, HMRC will be informed automatically and it will understand the existence of the new entity. HMRC will send a corporation tax registration form to the contractors and the company’s registered address and the individual is responsible to provide all necessary information about the company about the type of business they are running.
How much corporation tax should you pay?
As per the tax year 2018-2019, 19% of the profit is paid as tax. For Example, a business with £100,000 revenue (annual) will pay a tax of £19,000. To ensure you are paying the right amount and reduce the tax, you can claim allowable deduction and expenses. You need to submit proofs and evidence. For example, if you have bought a new machine for the business worth £5,000 and forget to claim the amount in the capital allowance, you can reduce £5,000 from the revenue which will help you save around £1,000.
You need to check the allowances and deductions for your industry as it differs from one business to another. There are many basic things that every business owner is aware of and there are few things that will help them reduce the contractor corporation tax.
Claim the expenses
As a contractor or a business owner, you will have a lot of expenses. It might be tough to handle all the records however, it is essential so that you can claim your taxes. £1-£3 spent on travel, paper and other office stationery might sound silly but if you add up the expenses for the whole year, you will have the eligibility to save more.
There are industry-specific claims that you can make. You need to know what is included and what is not. Professional insurance, pension contribution are some of the deductions you need to account.
Don’t forget to pay your salary
Whether you are a contractor company or a limited company, you need to include your salary into the accounts. Sometimes most of the business fail to calculate their own salary which can cause an impact on the profit and revenue calculation. Paying yourself is an expense for the business and it will have a huge difference during profit calculations.
Government Annual investment allowance The UK government gives you the benefits of annual investment allowance that gives you the scope to buy new machinery, expensive piece of items, laptops, printer and other devices. You need to find the list of things that are included and make use of the opportunity to save your taxes.