Business Finance - Our 3 Favourite Tax Tips!
If you are in business, at some point your will incur some sort of business finance cost.
Do you wonder how to treat the different sorts of business finance in a tax efficient manner, whilst keeping your business running smoothly and efficiently?
What are our tax tips to consider when incurring finance costs?
Is there a difference to the way things are treated by the Taxman if you are a Sole Trader or a Limited company?
Business Finance - Our Three Favourite Tax Tips For Keeping Your Business Healthy!
Business Finance Tip 1 - Overdraft Interest
Any overdraft interest cost that a business incurs will normally be fully deductible for tax purposes.
For a Sole Trader, if their capital account is itself overdrawn, then the Taxman may seem to restrict what is allowed accordingly.
Business Finance Tip 2 - Credit Card Interest
Any interest incurred on a business card will be deductible.
For a Sole Trader, if there is perceived personal use then the interest will not be deductible for tax purposes. For a limited company, using the credit card for personal use will give rise to a benefit in kind, but will not stop the interest to be deducted from taxable profits.
Business Finance Tip 3 - Loan Interest
Any loan interest which you pay as a business can be deducted for tax purposes if incurred wholly and exclusively for that business to use.
Even if a loan is taken out by a sole trader is secured on a private asset, such as their home, this will not stop the interest from being allowed to be deducted for tax purposes.
Two additional bonus Business Finance Tax Tips:
Hire Purchase Interest - Will be allowable against taxable profits (as are operating lease payments) except if the asset is used privately by the proprietor.
Incidental Costs To Obtain Finance - Costs such as valuation or arrangement fees, or insurances required to secure a loan can also be deducted from your taxable business profits.
Our Business Finance Call To Action
Keeping your business healthy with the right finance is a genuine business concern for all companies, whatever they do or however they are structured. This takes time and energy to do it properly and have all the right parts in place to grow and survive.
Fortunately, if the business finance is incurred to grow the business and not for personal purposes, then the Taxman allows you to deduct the cost for tax purposes and become successful.
If you know of any other great tax tips relating to business finance that can be shared with our readers then let us know via the comments or through LinkedIn.
The PJW Call To Action
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Remember - Don’t Leave a TIP with the Taxman!