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How to cut your tax bill

by Catherine Woods - Monday, 7th January 2008 -

How to cut your tax bill

Rueing the amount of money that you pay straight into Gordon Brown's coffers? Here’s three killer tips to slash your tax bill.

1 Be a dragon

A tax efficient way to invest your hard-earned cash is to plough money into an up-and-coming business. Tony Hayday, CEO of The Software Bureau, says he takes advantage of the government’s Enterprise Investment Scheme.

“If you’re a UK resident and you’re prepared to invest in UK business, you will not pay any tax on any profit so long as you keep on investing in it for three years,” he says. “The scheme is about intelligent people recommitting their earnings into the future
of Britain.”

2 Defer your income

The Read Group sells a lot of licences. CEO Mark Roy decided to defer the income from the sale of the licences instead of taking it all into one month. “Hypothetically, if you sell a £120,000 licence in December, you defer £110,000 of that to the following year, thereby lowering that tax bill,” he says.

“That’s a recommendation from the international accounting standards in terms of what you should do. Taking all the revenue may look good on the P&L account but it’s not so great on your tax bill. If you have the opportunity to defer your income, then do so.”

3 Introduce childcare vouchers

If you offer your staff childcare vouchers to be used for registered or approved childcare, you are exempt from paying employers National Insurance contributions. Stephen Clarke says the company he founded – Truancy Call – has introduced
this benefit.

“This has particularly benefited me as I have a two-year-old daughter who goes to a childminder. I don’t get taxed at a higher rate on the fees I pay to the childminder, which has helped to save me hundreds of pounds this year.”

Got any other tax-saving tips? Post your comments here.

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