When it comes to running your own limited company, it can be a bit of a minefield finding the right people to support you with the right things, and to give you the best for the here and now, as well as the future.

You’re an expert at what you do, so you want your accountant to be an expert at what they do too, because this is how you get the best advice – for you, your limited company and tax efficiency.

Here are 8 things your accountant should have told you, so you can have peace of mind that you’re being as tax and business savvy and efficient as possible in your limited company.

1. Salary Efficiency

One of the main reasons people incorporate their business into a limited company is for tax efficiencies, especially when it comes to how you take your money from the business.

You and your limited company are separate legal entities, which means you can take a salary from the company, as well as dividends. 

Dividends are a distribution of the profit the company has made (your company must be making profit for you to be able to take dividends).

It might be the best option is the secondary national insurance threshold, so your company can avoid paying employers national insurance for you.  Or it might be the personal allowance limit is the most tax efficient because your salary is a cost that reduces the corporation taxable profit in your business.  Or there might be other options, depending on your specific company.

The most efficient amount of salary to take will often depend on whether you have employees, or it’s just you in the business. 

Whatever the right answer though, your accountant should tell you, for your specific circumstances, what the most tax efficient option for you and the company are.

2. Mobile Phone Costs

This one is very simple; as the employee of a limited company, the company can pay for your mobile phone bill as a tax-free benefit in kind.

This means, if you have one phone that’s used for both business and personal purposes, you can transfer the cost of this to the company.  The cost of the contract is then the company’s cost, which is corporation tax deductible for the business.

To do this, the contract needs to be in the company’s name – it’s the company’s bill.  The payment for the bill should then come from the company’s bank account.  It shouldn’t touch you, your name or your bank account.

3. Pension

Another great benefit of operating a limited company is tax efficiency through pensions. 

A limited company can pay into an employee’s pension, without the employee necessarily having to make pension contributions themselves.

Usually pension contributions are deducted from employees’ salaries at a certain percentage, and the employer tops the contributions up with an additional percentage. 

There is, however, the option for a company to pay into an individual’s pension without the individually having to contribute at all.  This is great for owner/directors of limited companies, because it means the company pays, and you don’t have to yourself.  For the company, this is tax deductible, so it reduces the amount of profit in the company that corporation tax is charged on.

An auto-enrolment pensions scheme doesn’t have to be operated for directors.  Therefore, if you’re a single director limited company with no employees, you don’t need to worry about operating an auto-enrolment pension scheme for yourself, the company can just pay into a pension on your behalf.

If you do have employees, it’s likely you’ll have to operate an auto-enrolment scheme to meet the company’s obligations for the Pensions Regulator – so don’t be caught out by this one.  However, that doesn’t mean you can’t do something different for yourself with pension contributions from your company.

4. Trivial Benefits

Trivial benefits – ever heard of this one?

Trivial benefits are designed to ensure no benefit in kind needs to be accounted for if a company were to buy an employee some flowers or chocolates for their birthday, for example.

The company can buy something for you or your employee(s), as long as it’s a physical thing and not cash or a voucher, and it costs less than £50.  This gift is corporation tax deductible for the company.

For directors of limited companies there is a restriction; this can only be done 6 times within a financial year.  I.e. 6 gifts of something worth up to £50, so £300.

It’s a nice little one to know about, and utilise on occasion when it suits you best.

5. Best Practice Advice

With knowledge of the accounts of your company, your accountant should advise you on improvements you could make in your business.  This might be by way of costs that could be claimed to reduce tax payable, or how to best avoid bad debts.

Depending on your company and your accounts, there could be lots of things to talk about to improve things for the best for you, or there could just be a few. 

Either way, you should be having a conversation with your accountant periodically – i.e. at least once a year as a minimum – to help you have peace of mind you’re doing everything in the best way for you and your company.

6. Assets Advice

You should be receiving support to ensure you’re making the most out of tax efficiencies when purchasing fixed assets for your business.

Fixed assets are the higher priced things you’ll buy in your business, that you’ll then use for multiple financial years.  It’s things like computers, phones, tablets, machinery, vehicles, desks and chairs…

There are different rules for different types of assets, but your accountant should be advising you what the best options are for you and your business, so you can ensure the most tax efficient solutions are in place.

For example, if you purchased a brand new, fully electric car in your business, the value of this is 100% corporation tax deductible in the year of purchase.  By purchase, it has to be either outright or via hire purchase, where you own the asset at the end.  PCPs and leases work differently.

Plant and machinery and computer equipment are 100% tax deductible in the year of purchase too, providing it’s all within the Annual Investment Allowance limit for the given financial year.

As a minimum, your accountant should be asking you about the assets in your business, so both you and them can ensure everything is accounted for accurately for your accounts and corporation tax return.

7. Corporation Tax Efficiency

A lot of the items we’ve already listed support your company to be the most tax efficient it can be.  This is something your accountant should help you with.  Especially now, with the corporation tax rate changing.

From 1st April 2023 the corporation tax rate changed to 25%. 

If your company’s profits are less than £50,000 you will qualify for the small profits rate of 19%. 

If your profits between £50,000 and £250,000 the corporation tax rate is 25%, but you can claim some marginal relief, depending on how much your profit is, which will reduce the amount of corporation tax payable. 

This, essentially, will make the corporation tax rate somewhere between 19% and 25%.  Over £250,000 of profit though, the corporation tax rate will be a straight 25%.

It’s more important than ever to be corporation tax efficient now.  You should be getting advice from your accountant to help you ensure you don’t have to pay any more corporation tax than is absolutely necessary.

8. Systems / Software Advice

There are a lot of software options available for small businesses, especially when it comes to cloud accounting solutions.  Your accountant should help you with the best options for you and how you want to operate your company.

Not all cloud accounting solutions are the same.  There are different ways of working, software solutions that connect with some options and not others.  Overall, however, your accounting system solution should work for you.  You shouldn’t have to work to make it work.

Some older software solutions can be difficult to operate for those who aren’t accounting or financially trained.  These solutions cause unnecessary headaches for small business owners, that are entirely unnecessary.

Make sure your accounting solution works for you, and not you battling to make it work.

If you haven’t spoken with your accountant about any of these items, make sure you do! If you’d like to talk to us about this, or anything else, please don’t hesitate to get in touch!