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Free Guides for new and growing businesses from HRBS - fixed fee accountants and business advisors

Thinking of starting a business?

hrbs.biz guide to starting a business Thinking of starting a business?If you are turning a hobby into a business or starting a whole new venture, here are some tips to help you get up and running without falling foul of the (UK) tax authorities.

Bear in mind that your self employment income will be added on to your income from all other sources when calculating your tax bill.

However, if you make losses you can offset those against your other income for the tax year, thereby potentially getting a tax refund.

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Planning for your self assessment tax bill

hrbs.biz guide to paying your self assessment tax bill Planning for your self assessment tax billThe UK income tax year is 6 April to the following 5 April and so the tax year 2015/16 ran from 6 April 2015 to 5 April 2016.

You will need to complete a self assessment tax return if you are self employed, have untaxed income (eg rent), or if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit or contributions towards the upkeep of a child. Limited company directors are often required to submit a tax return.

A self employed person will pay both income tax and class 4 national insurance (NI) on their profits plus income tax on any other income and capital gains tax on any relevant capital gains in the tax year.

Student loan repayments collectable under self assessment (typically the self employed and directors receiving salary and dividends from their own company) are also included in the January self assessment payment but not in the payment in account.

Although the deadline is 31 January for e-filed tax returns, we suggest that your return is submitted to HMRC as early as possible.

Click here to download a useful pdf tax return checklist.

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Save Tax and National Insurance with your limited company

hrbs.biz guide to saving tax and national insurance with a limited company Save Tax and National Insurance with your limited company
It is possible to reduce your (UK) personal tax and national insurance by running your business via a limited company.

The amount of tax and NI you can save will depend upon several factors including the company’s profitability, your personal circumstances and the amount of funds you wish to withdraw from the business.
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How to form a limited company

hrbs.biz guide to forming a limited company How to form a limited companyMany businesses are making the change from being a sole trader to running their business through a limited company to take advantage of the limited liability and also the opportunity for tax planning.

An extended version of this HRBS.biz “How to form a limited company” guide can be downloaded as a free pdf here.

Click here for the “How to save tax and National Insurance” article.

Suppliers and customers often prefer to deal with a limited company as it can imply stability, longevity and also the company’s accounts and details of directors are in the public domain. This makes it easier for credit reference agencies and debt insurance providers to recommend credit limits. Unfortunately your competitors can find out about your company’s performance, ownership and mortgages etc at Companies House from only £1!
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A quick guide for your new limited company

hrbs quick guide to limited company A quick guide for your new limited companyGetting at your profits

Extracting your profits from your company can be by a mix of wage (ie under PAYE) and dividend. In order to pay a dividend the company must have sufficient after tax profits. ie for a £10,000 dividend to be paid the company must have at least £12,500 pre-tax profits (corp tax rate of 20%).

Do not be tempted to withdraw more than is legally available as dividend, as it would be void and treated as a loan repayable to the company. If the loan is to the director it would be a taxable benefit in kind if over £5,000 .

For more on how to extract your profits in a tax efficient way, read our article “Save tax and National Insurance with your limited company”.

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