When you’ve just started a business, you understand quickly that nothing is as simple and straightforward as it appears on paper. Ideas are nice, but actually creating a system that ensures growth takes a lot of effort and persistence. Decisions are waiting to be made every day, and uncertainty seems to be the game throughout.
Luckily, it doesn’t have to be this way all the time – it’s all about having the right approach and using the right tactics to make the most of situations (even bad ones). Have you ever wondered how you can grow your business faster? Here’s how to improve your business’ tax efficiency – and increase your profit at the same time.
Get a pension scheme
By getting a pension scheme, you are able to do three things that benefit you and your company. First, you are securing your financial future. Secondly, you are able to take profit away from your company and put it into your own pocket. Thirdly, and equally important: you are able to do the former two whilst enjoying tax relief. The government is very lenient with this because the pension scheme is not treated as a benefit.
Salaries and bonuses
When it comes to salaries, it’s often wise for the directors to take the minimum salary; the first £11,500 is tax-free and any amount above that is set for 20% taxation. By keeping the salary to a minimum, you reduce your taxes yet benefit the most from your wages. The obvious way to compensate for this is by giving yourself bonuses, either in cash or in non-cash payments.
Anyone who owns a share of the company can be paid dividends. As long as there is enough profit to cover these costs, it’s often a good idea. Starting April 2018, the UK government is going to reduce the tax from £5,000 to £2,000 per tax year, so take advantage of it now.
Investments are another way of avoiding large taxes; tax-efficient private investments early on can make a big difference down the road.
At the end of the day, it’s all about cash flow and being able to manage that cash flow so it gives you the most advantages – not just now, but in the future as well, as accountants central London from firms such as GSM & Co. know all too well. It’s about having a little foresight and arranging the system so you get the most of the situation. It requires some discipline and knowledge – you need to train your mind to a certain way of thinking. But the truth is, anyone can do it. It’s really not as hard as anyone might think. Your business is important, after all.