Benefits of Owning a Private Limited Company in the New Tax Year

 

April comes, and the start of the new tax year sharpens the focus on taxation for several self-employed people in the UK. This is especially important for private limited company persons, who can boost net income by becoming tax efficient. However, the pressure to meet tax obligations, ensure compliance and avoid penalties is always present.

Every tax year brings new updates and statutory changes, aggravating the challenge from a compliance perspective. For the 2024-2025 tax year, this challenge remains the same for private limited companies. A case in point is that the personal dividend allowance is reduced again from £1000 to £500. So, limited company directors, shareholders, and directors can receive tax-free dividend amounts. 

On the other hand, some of the changes are positive, like the class 1 National Insurance Contributions reduced by 2p in the £1, which means a significant tax-saving opportunity for self-employed persons. 

This blog post will explain critical benefits for the private limited company in this new 2024/2025 tax year.

Optimise Your Earnings

Being tax-optimised is the essential source behind the popularity of private limited companies. Everybody wants to earn big with little effort. If you operate outside IR35 and optimise your tax position, you can achieve that without working while remaining fully compliant with your tax obligations.

Even though the personal dividend allowance got cut, you can still save on taxes by balancing your pay with salary and dividends. Dividend tax rates are lesser than income tax rates on salary, so splitting your pay can lead to tax savings.

You can adjust your salary to be tax-efficient, depending on your situation. Then, you can add to your earnings with dividends, which are profits left after the company covers expenses, pays salaries, and deals with Corporation Tax. Because dividend tax rates are lower, your total tax bill goes down, meaning you take home more money. Our expert accountants can help you figure this out.

Eligible Expenses and Tax Deductions

As a private limited company owner, you are subject to Corporation Tax on your company profits. Reducing corporation Tax Liability is essential when considering your company’s holistic tax efficiency. So, it is vital to make sure you claim all allowable expenses used exclusively for running your business. These allowable expenses are deducted from your company income while calculating the corporation tax liability. The overall effect is to lower taxable profit, lessening the corporation tax you pay.

Some of the main expenses that can be claimed but not limited to are described below.

• Purchase of Mobile Phones
• Purchase of Computer Equipments
• Travelling and Accommodation costs
• Training
• Business Entertaining 
• Insurance
• Subsistence Accountancy Fee
• Stationary and Annual Events

Making a clean record and organising the relevant invoices, receipts, and supporting documentation can make claiming expenses much easier and more accurate. This also ensures that everything is noticed.

Pension offerings you make through your private limited company are also deductible and enable you to save significantly for retirement. This also helps reduce your corporate tax bill.

What are significant VAT changes for a Limited Company?

Substantial changes to the value-added tax return became effective on 1st April 2024. This is the first time in the last seven years that the mandatory VAT Registration threshold has changed from £ 85000 to £90000. There’s also a change in the mandatory deregistration threshold, which rose to £88000 from £83000. This means businesses can exit the scheme whenever they wish.

How do these VAT changes benefit Businesses?

These VAT changes for private limited companies can benefit businesses. One significant benefit is that they will be stress-free from administrative burdens. This includes record-keeping and accurately charging VAT voluntarily if their turnover exceeds the mandatory registration threshold. Also, there are pros and cons associated with it.

How Can a Lockhart Amin Accountant Be Perfect for Your Private Limited Company?

In addition to tax benefits, other advantages of a private limited company include limited liability, which protects personal assets. It also saves your brand identity and improves your perception of business. However, one thing that can simplify the whole process and benefit you is to appoint a limited company accountant.

When you choose Lockhart Amin Accountants, you don’t need to worry about tax changes, as we handle them for you. It’s our motive to make our customers stress-free. With us, you will have peace of mind as your accountant will ensure that your tax obligations are completed and that no penalties will be forthcoming. Also, we will make your business operations smooth and tax-efficient to boost your earnings.

Our tailored service for business and personal accounting is handled professionally. So, we simplify your tax process, allowing you to focus on business stress-free.