Hi
Business owners should review the structure of their business at key stages in
its lifecycle. A structure which suits a young business (e.g. a sole trader) may not be
appropriate when the business matures and requires external funding.
The choice of the business vehicle will affect the level and timing of tax payments, as
well as the availability of tax reliefs. Using a company can reduce the total tax and
National Insurance payable by a business and its owners, compared to the total
payable when trading as an unincorporated business. However, the methods used to
extract value from the company will have a significant effect on the tax liabilities of the
business
owners.
Tax savings can be made by operating as a company, as opposed to an unincorporated
business, at all profit levels – but in 2016/17 those savings are reduced.
And as we have seen in the past months, tax law changes all the time. The introduction of the dividend tax effective from 6 April 2016 is designed to discourage tax-inspired incorporation. If the new tax is perceived
not to have reduced the number of incorporations, further tax changes may follow.
At Guilford Accounting we partner with TaxCalc, who provide our accounts and corporation tax filing software, and who have just released an excellent summary of the 'incorporation decision'. You can get a complimentary copy here.
Not all our subscribers want our tax tips and, as we don't want to fill your inbox with
information you don't want, please us know by signing up to our tax tips newsletter if you would like to receive publications like this one and our other regular tax saving suggestions. We promise that we do not promote tax avoidance schemes and will never email you with anything other than information and advice
appropriate to your business.
Please feel free to forward this email to any of your friends and colleagues who may benefit from our tax tips.
Noel Guilford
Noel Guilford is the principal of Guilford Accounting a small business
accountancy practice specialising in advising owner-managed businesses on current accounting, finance, and tax matters. You can reach him via email at noel@guilfordaccounting.co.uk or by phone at 01244 660866. He is the author of the best selling book 'Figure it out - an entrepreneurs guide to understanding your business numbers' which you can
obtain by visiting http://guilfordaccounting.co.uk/figureit out.