10 TAX SAVING TIPS FOR PEOPLE IN BUSINESS
Everyone expects to pay tax, however, are you sure you are not overpaying your income tax? Below are some of the most common (and easiest) ways to save tax on your business:
- Set up a pension fund (if you haven’t already)
Not only is this good financial planning for your future, but it also gets tax relief on the contributions you have paid over the year.
As we all know, the tax year runs from January to December, and income tax returns are due to be filed and paid the following October. As an added extra, any contributions you make between January and October can be used to reduce the previous year’s tax if necessary.
- Keep good records of your expenses
Good record keeping is important when it comes to your income and expenses. Make sure to ask for receipts for everything and then keep them somewhere safe. This is more important for expenses paid by cash so you don’t “loose” expenses. Remember, business expenses reduce your profits (and therefore your tax bill!)
- Separate business and personal finances
Always have separate bank and credit cards for your business and never mix your personal finances with your business. This is really a follow-on from point 2 – having a separate bank account will make it easier to calculate your profits and reduce the chances of expenses being overlooked.
- Take out Income Protection Insurance
I tend to go on about this a lot to clients. Having income protection insurance means that if anything happens and you become too ill to work, the insurance pays you a wage until you are able to resume work – a must have for the self-employed. You can also get tax relief on the contributions you make under Revenue’s Health Benefit Scheme.
- Employ family members
Employing a family member can be tax effective as the cost of their wage can be used to reduce profits for tax. So if you have a teenager who can do some office work or online marketing etc. (let’s face it, they are probably more technically savvy than us!). Once the child performs genuine tasks in the business, then that salary paid to them is tax deductible in your business. No PRSI is charged if the child is under 16, or if over 16, carries out the work at home where the business is carried on. The child’s salary will be liable for USC charge but at the lower rates. You must, however, register with revenue as an employer
- Allowance for home office
If you have your office at home, then you can claim a percentage for rent, light and heat, and broadband. The percentage will depend on the size of the house and how much is used for the business. Nice way to get tax relief on expenses you have to pay anyway to run your home.
- Using a car for your business
If you use your car in your business, then you can put all the motor expenses through the business. However, if you use this car for any personal use you will need to write back a percentage to account for the personal element. Make sure the car is in your name or revenue will try to disallow the expenses
- Medical Expenses
Keep all medical receipts – doctor, dentist, hospital, consultant and prescriptions. These can be used to give you 20% off your tax bill! If you haven’t been diligent at keeping these receipts, pharmacies and doctors will usually give you a printout for the year so you can make sure you are claiming everything. If you have a family, you can include medical expenses paid for children under 16.
- Tuition fees
If you or any members of your family have done any 3 rd level courses, keep a record of the fees paid – these can be used as a credit to reduce tax. The credit isn’t great, but every little helps
- Be jointly taxed with your spouse
Being jointly taxed means that any unused tax credits can be passed from your spouse to you to reduce your joint income tax. Also on this, if your spouse has PAYE income, make sure they are claiming any relevant Flat Rate Expenses (see revenue.ie for a full list of these).
Finally, if you are unsure if you are claiming all relevant credits and allowances, or are worried that you might not be including the correct expenses in your business, then give us a shout to see if we can help. (AND, accountant’s fees are also a business expense and therefore used to reduce your tax bill)