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.
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
- 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
1.2. 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
3.2. 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
4.2. 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
5.2. 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
6.2. What to put on your tax return?
6.3. Examples of using company assets
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
7.2. 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
8.2. 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?
9.1.2. 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
10.2. 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
11.2. 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
12.1.2. 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
13.2. 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
14.2. 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
15.2. 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
16.2. 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
17.2. 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
18.2. 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
19.2. 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
19.5.3. 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
20.2. 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
21.2. 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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