9 Hacks for SME Businesses 2023
To help business owners navigate the cost increases, we have outlined 9 hacks below to help you stay ahead.
If you have any questions or would like some advice on your business’s finance, please contact the OutRise team and book a free Discovery call where we can chat through your problems in a little more detail.
1. Get paid interest on your Corporation Tax Bill
- Early repayment interest from HMRC is currently 2.5% (Jan23).
- This means that HMRC will pay you interest of 2.5% if you pay your corporation tax before the payment deadline.
- The earliest they will give you interest is 6 months and 13 days after the start of your financial year to the date it actually needs to be paid.
E.g. 01 Jan 23 – 31 Dec 23 company year. Pay your corporation tax on 13 July 23 and you’ll receive interest through until 01 Oct 2024. Not bad if your money is just sitting there not doing anything.
- It should be for the purposes of improving the trade or required for working capital purposes, but in short, you can.
- This will be interest income for you on your tax return but corporation tax relief for you within your company. With current rates, and certain scenarios this can net to 1% tax!
2. Can I put money into my company and charge interest on my Directors Loan?
3. Is it cheaper to borrow money from my company?
- If the amount you owe your company doesn’t exceed £10,000 at any time there’s no taxable benefit. If you owe more than £10,000 at any time in a tax year the tax charge applies for that year based on the whole debt.
- You can get rid of the benefit by charging interest on the loan you have borrowed at HMRC’s official rate.
- The official rate of interest from HMRC is currently 2% (to April 2023). Cheap finance if your company can afford it from a cash flow perspective.
- Paying interest on money you owe to your company can be tax efficient if you own all the shares in the company. The saving is marginal if you’re a higher rate taxpayer but significantly greater if you only pay tax at lower rates.
Directors – 6 x £50 vouchers throughout the year
Employees – no limit but should be sporadic
- must cost you £50 or less per employee
- cannot be cash or exchangeable for cash
- cannot be given as a reward or incentive for services
- is not mentioned in an employee’s contract as a perk; i.e. it’s not a benefit in kind
There are plenty of other occasions when you could give employees a gift card that wouldn’t count as a reward for services – birthday, wedding, new baby, anniversary (not work anniversaries though as this would be deemed a reward), housewarming, Easter, etc.
The website we tend to use as it has a large selection of shops – One4All
4. Gift cards - £300 per director each year
5. Can you pay an employee that isn’t subject to PAYE?
A payment is not “by reason of employment” simply because it’s paid by an employer to an employee.
HMRC’s Employment Income Manual makes it clear that a gift, whether in cash or in kind, isn’t earnings if it’s made:
- on personal grounds, e.g. a wedding present
- as a mark of personal esteem or appreciation
Rewarding the employee for something unrelated to their job is not earnings, therefore no PAYE or NIC.
A payment that’s made by reason of employment is earnings and so liable to PAYE tax and probably NI. However, gifts, e.g. a wedding present and voluntary payments as a token of personal appreciation, aren’t earnings if they are made for reasons not connected to the employee’s job.
For a long time you have always been able to pay your VAT via direct debit but never your PAYE – bizarre. Now you can!
Paying your self-assessment tax is as simple as scanning a QR code now too – automatically inputting your correct reference and HMRC account details. Just log into your HMRC account and navigate to pay my self-assessment.
These kinds of things aren’t everything by any means, but they all save time and minimise errors so you can focus on driving your business forward.
6. Useful HMRC admin - SA, VAT and PAYE Direct Debit
7. Use your spouse’s reliefs too
For married couples or civil partners, they can usually transfer assets (which include shares in a limited company) to one another without incurring tax. This could be beneficial before thinking about selling your business or if one partner has a lower tax rate than the other.
From April 2023 there will be more than 1 corporation tax (CT) rate.
- 19% (the small profits rate (SPR)) where annual profits <= £50,000
- 25% (the main rate) if profits are higher.
There is some ‘marginal relief’ between £50,000 and £250,000 profit bandings.
- Companies with subsidiaries or associated companies must split the bandings by this number!
E.g. Consider a holding company and a trading company as its subsidiary. Both corporation tax thresholds are divided by 2, so that the small profits rate only applies to the first £25,000 of profits in each company.
This will usually result in a higher CT bill overall than a single company with no subsidiary or associate.
What can you do?
Think about recharges that can happen between each company? Are there contracts in place to validate management recharges to increase profits in one company and reduce them in the other?
8. Think about your other companies
9. Exchange some of your salary for a car allowance
Exchanging part of your salary for a car is possible, depending on the type of car.
The optional remuneration arrangement rules do not apply to cars with CO2 emissions of > 75 g/km. These cars continue to be taxed on the cash equivalent of the benefit without having to make a comparison with the salary foregone.
If you lease from a 3rd-party supplier that has partnered with the company. The cost of the car is deducted from your salary each month before you are taxed (saving you income tax and NICs!).
E.g. An employee is provided with a low emission car under an optional remuneration arrangement in which the employee gives up £125 pcm (the amount forgone). The car has CO2 emissions of 70 g/km.
The car has a list price of £11,500 and a cash equivalent value of £1,495 (£11,500 × 13% BIK).
Although the £1,500 (£125 x 12) which is the amount foregone by the employee exceeds the cash equivalent value of the benefit of the car, the optional remuneration arrangement rules do not apply to low emission cars.
The relevant amount to treat as earnings remains at £1,495.
Still need help navigating the cost increases?
Now can be a tricky time for businesses if they haven’t got the right financial support. Book in a free Discovery call with the OutRise team to see which steps you need to take.
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