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Tax Breaks for Directors

A Tips & Advice book about... 

In a nutshell

This book is a must-read for all directors that want to pay less tax - legitimately. It explains how you can take full advantage of the available tax breaks. It shows all the options, so you can make the right choice for your situation. This new edition includes all the latest changes to the tax and NI rules, so you're sure to have the latest information to hand.

In detail

Regularly reviewing your remuneration package for tax efficiency should be high on your “to do” list as a director. This book brings all the tax breaks within easy reach, giving you a clear overview of the various reliefs you can safely benefit from, including:

  • Salary, dividends and benefits
  • Employer-supported childcare
  • The employment expenses exemption
  • Salary sacrifice arrangements
  • Using your home for business
  • Income shifting
  • Company cars
  • Loans
  • Saving for your retirement
  • Selling your company

Written in plain English, this book enables you to choose the tax-reducing strategies that best suit your personal situation. Simple, safe, secure.

We've created this Tips & Advice book especially for... 

Company directors/shareholders that want to:

  • Keep their tax bill as low as possible
  • Get a clear view on the various available tax breaks

Financial advisors and accountants that want to:

  • Help clients choose the most appropriate tax-saving strategy for their situation

In this Tips & Advice Book you'll read about...

Part 1 - Directors only

1. Compensation for being a director

1.1. Introduction

1.2. What form of compensation?

1.3. Directors’ fees

1.4. Tax relief for the company

2. The higher tax rate regime

2.1. Basic rules - tax rates and allowances

2.1.1. Income tax

2.1.2. Pension contributions

2.1.3. Pension carry-forward relief

2.2. How to maximise tax efficiency on income?

2.2.1. Timing your income

2.2.2. Salary sacrifices (optional remuneration arrangements)

2.2.3. Inter-spouse share transfers

2.2.4. Taking capital instead of income

3. Your salary

3.1. Introduction

3.2. Directors’ salary and the NMW and NLW

3.3. Low salaries

3.4. Higher salaries

3.5. What to put on your tax return?

3.5.1. Tax-deductible expenses

3.6. How much tax will you pay?

3.6.1. PAYE codes and underpayments of tax

4. Directors’ bonuses

4.1. Introduction

4.2. What to put on your tax return?

4.3. What’s the NI cost?

4.4. At what rate will your bonus be taxed?

4.5. Deferring a bonus

4.5.1. Deferring the tax charge

4.5.2. Pension contributions and benefits

4.6. Not drawing the cash

5. Company cars

5.1. Introduction

5.2. Ownership and choice of the car

5.2.1. Does it matter what type of car you have?

5.2.2. Electric and hybrid cars

5.3. What to put on your tax return?

5.4. Contributing to car purchase to reduce tax

5.5. Contributing to car running costs to reduce tax

5.6. Optional extras

5.7. Car fuel

5.7.1. Is it tax efficient to provide fuel for private motoring?

5.7.2. Power for electric cars

5.8. Second company car

5.9. Classic cars

5.10. Vans and double cab pick-ups

5.10.1. What about fuel for vans?

6. Using company assets

6.1. Introduction

6.2. What to put on your tax return?

6.3. Examples of using company assets

6.3.1. Antiques

6.3.2. Mobile phones

6.3.3. Home computers

6.3.4. Reducing the taxable benefit

6.3.5. Short term private use

7. Loans to directors

7.1. Introduction

7.2. How do you set up a company loan?

7.3. What to put on your tax return?

7.4. How much tax will you pay?

7.5. Alternative calculation

7.6. Your company’s tax position

7.6.1. Accounting disclosure

8. Medical bills and insurance

8.1. Introduction

8.2. What’s covered?

8.2.1. Eye tests

8.3. What to put on your tax return?

8.4. How much tax is payable?

8.5. When will you be taxed on medical expenses?

8.6. What are the rules for coronavirus testing?

9. Childcare

9.1. Introduction

9.1.2. Tax rate loophole

9.2. How do you set up a childcare scheme?

9.2.1. Childcare vouchers (or subsidy)

9.2.2. Workplace nursery

9.3. Are there restrictions or financial upper limits?

9.4. What to put on your tax return?

9.5. How much tax is payable?

9.6. The Tax-Free Childcare scheme

10. Expenses

10.1. Introduction

10.2. Exempt expenses

10.2.1. What’s covered by the exemption?

10.3. Advances for expenses

10.3.1. Advances over £1,000

11. Working from home

11.1. Introduction

11.2. The £6 tax-free allowance

11.3. Where no homeworking allowance is paid

11.3.1. Amount of tax deduction

11.4. Renting a room to your company

11.4.1. The rental agreement

11.5. Claiming the cost of home broadband etc.

11.6. Homeworking business rates

11.7. Using your garage

12. Pension contributions

12.1. Introduction

12.1.2. Annual allowance tapering

12.1.3. Money purchase annual allowance

12.2. Company contributions

12.3. Carry-forward relief

12.3.1. How does it work?

12.3.2. Qualifying conditions

Part 2 - Director shareholders

13. Dividends

13.1. Introduction

13.2. The tax break dividend

13.3. Higher rate dividends

13.3.1. Taxation of dividend income

13.3.2. Additional income tax

13.4. Deferring higher rate tax

13.4.1. Practical points

13.5. Waiving higher rate tax

13.5.1. Practical points

13.6. Diverting dividends to save tax

13.6.1. Separate classes of share

13.6.2. Diverting dividend income to your spouse

13.6.3. Arctic Systems case

13.6.4. Providing dividend income for your children

13.7. Tax return entries

14. Tax-efficient salaries

14.1. Introduction

14.2. Tax break - mixing salary and dividends

14.3. National minimum or living wage

14.3.1. Practical NMW and NLW planning

14.3.2. Why not take an NMW or NLW salary?

14.4. Family salaries

14.4.1. How much can your company pay?

14.4.2. Is the family salary tax deductible for the company?

14.4.3. Practical points

14.4.4. At what rate will they be taxed?

14.5. Spouse’s salary - specific issues

14.5.1. Practical points

14.5.2. Pay commission to your spouse/civil partner instead

14.6. Spouse’s pension contribution

14.7. Teen wages

14.7.1. Practical points

15. Director’s loan account

15.1. Introduction

15.2. Charging expenses

15.2.1. Practical points

15.2.2. What type of expenses can you credit to your DLA?

15.3. Charging interest on a DLA

15.3.1. Paying the interest

15.3.2. Tax return entries

15.3.3. Can you deduct any expenses from this interest?

15.3.4. At what rate will your interest be taxed?

15.4. Overdrawn loan accounts

15.4.1. Salary or benefits

15.4.2. Practical points

15.4.3. Clearing an overdrawn DLA

15.4.4. Writing off the loan balance

15.4.5. Practical points

15.4.6. Get your dates right

15.5. Keeping loan account records

16. Director as the company’s landlord

16.1. Introduction

16.2. Charging rent

16.3. Entries on your tax return

16.4. Expenses you can deduct from the rent

16.4.1. At what rate will the rent finally be taxed?

16.5. Renting example

16.6. Recovering VAT

16.6.1. Should you opt to charge VAT or not?

16.7. Special 10% CGT tax break

16.7.1. Time limit

16.7.2. The rent trap

16.7.3. Stop charging rent?

16.7.4. Pre-sale transfer

16.8. Selling your property to your company

17. NI breaks

17.1. Introduction

17.2. Current NI rates

17.3. Royalties and licence fees

17.3.1. How do you set up this up?

17.3.2. How much can you charge?

17.3.3. Practical points

17.3.4. Deductible expenses

17.3.5. On your tax return

17.4. Director sells assets to company

17.4.1. Does it matter what price you charge?

17.4.2. Tax return entries

17.4.3. Self-employed NI to pay

17.4.4. Deduct expenses

17.4.5. VAT implications

18. Building a pension fund

18.1. Introduction

18.2. How much can you put in?

18.3. Carry-forward relief

18.3.1. What is “carry-forward”?

18.3.2. How does it work?

18.3.3. Are there any qualifying criteria?

18.4. Pension fund invests in company

18.4.1. Trading premises

18.4.2. Equipment used in the business

19. Restructuring shares

19.1. Introduction

19.2. Acquiring more shares

19.2.1. Loans to acquire shares

19.3. Transferring shares

19.4. Shares to spouse/civil partner

19.4.1. How can transferring shares save tax?

19.4.2. Selling your company - maximising business asset disposal relief

19.5. Shares to other family members

19.5.1. Holdover election

19.5.2. Investments

19.5.3. Other taxes

19.6. Share buy-back

19.6.1. Nature of the company

19.6.2. Reason for purchase

19.6.3. Tax residence

19.6.4. Holding period

19.6.5. Substantial reduction

19.6.6. No connection

19.7. Funding a share buy-back

20. Inheritance tax breaks

20.1. Introduction

20.2. Keeping below the IHT threshold

20.2.1. The seven-year rule

20.2.2. Gifts with reservation

20.2.3. Keeping value outside the estate

20.2.4. Skipping a generation

20.2.5. Tax breaks for gifts

20.2.6. Pre-owned assets tax

20.3. Two nil rate bands for spouses

20.4. Business property relief

20.4.1. Avoiding the investment tag

20.4.2. Excepted assets

20.4.3. 50% for business premises

20.4.4. BPR example

20.5. Transferring shares during your lifetime

20.6. Shares you transfer on death

20.7. Unwanted shares

20.8. Planning points for your will

21. Selling your company

21.1. Introduction

21.2. Timing the sale

21.3. Sale of assets and trade

21.3.1. Double tax charge

21.3.2. Apportionment of proceeds

21.3.3. VAT treatment

21.4. Selling your shares instead

21.4.1. Pre-sale tax breaks

21.5. The inheritance tax angle

21.6. Useful warranties and indemnities

21.7. Business asset disposal relief (BADR)

21.7.1. The basic tax break

21.7.2. Material disposal

21.7.3. Offset other losses

21.7.4. Claiming BADR

21.8. Before you dispose of your shares

21.8.1. Maintaining personal company status

21.8.2. Beware of issuing new shares

21.8.3. Keep working for your company

21.9. Associated disposal

22. Year-end planning for directors

22.1. Why is timing important?

22.2. That 5 April date

22.2.1. Personal allowances

22.2.2. Pension carry-forward relief

22.3. Key dates for your company

22.3.1. Before your company’s year end

22.3.2. Before the accounts are finalised

22.3.3. Before the nine-month deadline

22.3.4. Board minutes

22.3.5. Directors’ loan accounts

22.4. When will your company get a tax deduction?

Appendix A - The Scottish income tax rates

Appendix B - Company car benefit





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