Tax Breaks
Five powerful Tax Breaks every month. See how much they could save you

November 2008

  • Plan ahead to get interest relief

    When buying a stake in a small business, you may need to take out a personal loan to provide the capital required. You can claim interest relief on such a loan if the company you invest in is a close company at the time you subscribe for your shares. This means that either the directors own the majority of the company's shares, or there are five or fewer shareholders. It doesn't matter if more shareholders join at a later stage, but in order to get you tax relief on your personal loan interest, you must be one of the first investors.

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  • Business can pay you rent
    If you own the property from which your company or partnership trades, the business can pay you rent for using the building instead of a portion of your drawings or salary. The rent paid does not carry an NI charge so both you and the business make tax savings compared to paying the salary or profit share.
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  • Harvest good ideas
    Your employees probably understand your business as well as you do and can have a valuable insight into how processes or systems can be improved. If you pay a bonus to the employee who comes up with a good idea, it would normally be taxed in the usual way. However, if you set up a suggestion scheme, you can pay employees £25 for the best ideas and up to £5,000 tax-free if the suggested improvement creates a significant amount of profit for your business.
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  • Build up your employees' skills

    If an employee wants to improve their skills by undertaking some training, this could also benefit your business. What's more, you can get the Taxman to help with the cost. If the employee pays for the course themselves, they may not be entitled to claim the expense against their tax. But if you meet the cost, it will be a work-related expense and so tax deductible. Tax relief can also be claimed on the associated expenditure for travel, exams and membership fees.

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  • Cut out the commuting
    If an employee works from home, you can reimburse them for the running costs they incur at home. This cost is difficult to calculate, so you can pay up to £3 per week free of tax without providing any additional evidence. If the employee can prove that their additional home heating and lighting costs are more than £3 per week, you can pay the extra amount tax-free as well.
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