Business entertaining is not allowed for VAT or Corporation/Income tax purposes.
The only exception is staff entertaining. I’ve written on this separately if you want the detail but it must be below £150 per person per year.
Customer and supplier entertaining are never allowable and this is one of the many adjustments that we make when we prepare your accounts and tax returns.
Tax Tip – Tax efficient salary 2024/25
A tax efficient salary for director/shareholders has always depended on your personal circumstances but, for most people, it mainly depended on whether our clients had spare Employment Allowance or not. Now that corporation tax rates have increased and national insurance rates have fallen there are far more things to consider and we will no longer publish a generic rate.
The good news is that we will soon be releasing an app so that you can work out the best rate for yourself. Please let us know if you would like to be informed when this is available.
Tax Tip
Client gifts are not usually tax deductible. Here are a few simple rules to ensure that you can claim them
- They can not be food, drink, or tobacco
- They must be under £50
- They can not be cash or cash equivalents eg gift vouchers
- They must carry a conspicuous advert for your company
Free samples of your products are usually acceptable
Tax tip – Don’t forget to get the VAT invoice!
No VAT invoice = no VAT reclaim so it is important to request a VAT invoice (which shows the VAT number along with other necessary information) and not just the receipt from the card machine.
Tax Tip
Don’t forget that you can claim some of the costs if your use your home for business.
You can claim £6 per week even if you just use the corner of the kitchen table to do your bookkeeping each week. If you use your home for more than this then contact us for a spreadsheet to see how much you can claim.
Tax tip
Cash is king and most small businesses fail due to lack of cashflow. Even if you have a relatively small business you can use accounting software like Xero to:
- Add a link to your invoices for clients to pay by card using Stripe, Paypal, or similar
- Plug a small (usually free) card reader (Zettle, Square, or similar) into your phone for clients to pay by card before you leave site
Tax Tip
Get your tax return done early so that you have more time to save the tax due. The deadline for payment is still 31 January 2025. If your income has reduced this year then we may also be able to reduce your July payments on account.
Tax tip
Company cars are not really tax efficient and we often advise clients to buy the car privately and just charge the company for mileage. For one client with expensive taste in cars we even recommended staying as a sole trader rather than a limited company.
This is because cars are treated as benefits in kind and taxed as if you have additional salary. The value of this benefit is based on a percentage of list price (including accessories). The employee pays tax and national insurance and the employer also pays national insurance.
The percentage used for electric vehicles is much lower than for others although this is increasing each year.
As well as the vehicle and fuel for personal use is taxed at a flat rate for the year so work out how much you use to see if it is tax efficient.
Tax Tip
Seven reasons to get your tax return done early. (It always amazes me why people leave this until the last 2-3 months)
- Know how much tax to pay with plenty of time to save up if necessary
- Have your latest accounts ready if you need finance or a mortgage
- Latest information available for tax and business planning
- Time to implement tax saving measures
- Less time to lose paperwork and easier to answer your accountant’s queries better
- Your accountant will provide a better service when they have enough time to carry out the work without the pressure of an impending deadline
- Your accountant will be happy and may even consider you an A grade client (yes, we do grade our clients)
Tax Tip – VAT Registration limit
If your turnover exceeds, or is expected to exceed, £85,000 in any twelve month period you will need to register for VAT from the following month.
Please note that this is a rolling 12 month period, NOT your financial year. It is a common mistake so, each month, you need to keep an eye on your sales in the previous 12 months.
We’ve had a few clients go over the VAT limit in the middle of their financial year and only find out when we do their year end accounts some time later. This means that they may end up having to pay the VAT themselves so it is worth keeping an eye on your invoicing.