For a sole trader, if your partner is not earning, then put them on the payroll at a modestly reasonable amount, although you may need to satisfy the Inland Revenue that they are working to justify the remuneration.
Any savings should first be placed in ISAs to their fullest extent before the tax year end, as these are tax free vehicles.
This scheme is excellent for the smaller trader, whereby instead of claiming for fuel bills, repair bills and depreciation, one instead claims for business miles, currently at a rate of 45p for the first 10,000 miles and 25p for the balance. This is a proven scheme especially for couriers where business mileage is so large. This results in very large mileage claims, thus reducing your tax bills accordingly.
Paying regular pension contributions, one obtains tax relief at source. For every £100 contributed, £80 will be paid by the individual, and the pension company will claim the balance from the government. In addition, if you are a 45% higher rate tax payer, then one can also claim this additional 20/25% off your tax bill. There is a limit to the amount you can claim tax relief at £40,000 per annum. A limited company can also normally get tax relief for pension contribution at its tax rate for up to £40,000 per employee/director.
The current turnover limit is £85,000. There are various schemes for small trader whose turnover exceeds this figure. Cash accounting, means that one does not have to pay over the Vat until one has been paid. There is also the flat rate scheme, whereby one pays a percentage (depends upon trade) of turnover as output vat, and normally one cannot claim any input tax (apart from large capital items).
Where you gift aid money to a registered charity, then that charity can reclaim the tax relief from the government (so long as you do pay tax). In addition, if you are a higher rate tax payer, then one can also claim this additional amount off your tax bill.
Take advantage of capital allowances which allow the costs of capital assets to be written off against your profits. Annual investment allowances enable a greater proportion of the capital expenditure on an asset to be set against the business’s profits of the period during which the investment is made. The current limit is £1,000,000 per annum for which you can claim tax relief at 100%.
It is important both to write a will, and to equalize estates between husband and wife. The new rules for Inheritance Tax are slightly more generous, in that where one spouse has not utilized all of their nil rate band on death, then the remaining spouse can utilize any unused relief, plus fully utilize their own reliefs.
Various other tax relief schemes are around that include investment in energy efficient plant and vehicles. Research & Development tax relief. Entrepreneur’s relief for capital gains tax may also be available if conditions are qualified, resulting in 10% capital gains tax.
A larger issue is planning for your smooth retirement and handover of the business without incurring large capital tax bills such as capital gains tax, inheritance tax or stamp duties. The key is planning in advance. I can help you with this.