Get advice and plan early for the most tax opportunities
I have just signed up a client who has a limited company which he set up over a year ago although he did not start trading until the current tax tax. From previous posts you will be aware that one of my recommendations for the biggest tax saving opportunities, is by your spouse taking some shares in the business especially if they do not work. In this particular case the wife was caring for a disabled child and was receiving the Carer Allowance. My recommendations for the client to save tax were:
- For the wife to be paid a small amount, she was involved in a number of administrative roles within the business. This has to be restricted to £95 per week otherwise the Carer Allowance would be restricted. A matter of note is that if you are in receipt of Carer Allowance, all of your basic NI contributions are covered.
- As the client made large contributions under Gift Aid his basic rate tax band was already in excess of £37400 limit. His income could therefore go up to this greater limit without paying tax at the higher rate. Clearly if he wished to and had the finances he could increase the amount given under gift aid to increase this further.
- He wished to make a pension contribution and having planned in advance of the end of the tax year, I was able to advise him of how much he could pay to avoid having to pay higher rate tax by extending his basic rate band further.
- He did not necessarily want to make too large a pension contribution as he is approaching retirement age so he now has the choice to make a smaller pension contribution and potentially fully utilise his ISA allowance of £10,200 for 2009/10.
- He had not been advised on what expenses he could claim on his company and I was able to assist him in this area, covering items such as use of home as office, and claiming the mileage rate. He had also just gone over the VAT limit, a fact he could easily have missed as he had excluded part of his income.
- He has now secured a full time PAYE position so the company may or not be retained but the moral of the story is to get advice early to make sure you:
- do not miss out on opportunities and
- also avoid the pitfalls.
We hope you find the contents of this blog useful, you should of course always seek professional advice for your specific needs. Alastair Wood, AW Accounting – Accountants who “speak your language”
