Employment and remuneration – looking after your employees Feed employees with free or subsidised food in a staff canteen Where the food is available to all employees, or all who work at a particular site, there is no taxable benefit for employees when they receive free or subsidised food. A catering or restaurant business must designate an area exclusively for staff use to eat their employer-provided meals. Provide electric or low-emissions company cars For 2023/24, all-electric company cars can be provided to employees with a taxable benefit of just 2% of the list price of the vehicle. Where a hybrid car is provided with CO2 emissions of up to 50g/km and an electric-powered range of 130 miles or more, the taxable benefit is also 2%. The employer can claim a 100% first year capital allowance deduction for the cost of new wholly electric cars. Encourage clean commuting by providing electric charging points Provide electric vehicle (EV) charging points at your business premises for your employees to use. There is no taxable benefit for the employees who use the electricity to power their cars and the business can claim a 100% deduction for the costs of installing EV charging points before April 2025. Don’t miss your VAT registration requirement If your business is not VAT registered, you must keep an eye on your turnover for the previous 12 months on a rolling basis. When it exceeds £85,000, you must register for VAT by the end of the month following the month in which your turnover exceeds the threshold. Once registered, you must apply VAT to all of your sales (except those which are exempt) and submit VAT returns to HMRC using making tax digital (MTD) compliant software. You also need to keep your VAT records in a digital format. Make the best use of your trading losses As a serious self-employed business person (HMRC generally expects you to be working an average of at least 10 hours a week for your business), any trading losses you make can be set against your total income for the tax year in which loss arose and/or the previous year. Relief for a trading loss made in 2021/22 can then be extended to offset against trading profits made in the three previous tax years, but that relief must be claimed by 31 January 2024. There is a cap on how much loss can be offset against your total income (but not profits of the same trade) being the higher of £50,000 and 25% of your income for the year. This extended carry back of losses is not available for years after 2021/22. Lower your tax rate by involving your family When your taxable profits go above £50,270 per year, consider bringing in your spouse or adult children as partners in your sole-trader business. A partnership can spread the profits over the basic rate bands and personal allowances of your family members, keeping the average tax rate of the family below 40%. The proportion of profits allocated to each partner can vary each year, although it is advisable to have a partnership agreement drawn up to document this. Use your own car for business journeys By using your own car for business journeys, you can receive a tax- and NIC-free mileage allowance of 45p per mile for the first 10,000 miles, and 25p per mile for any additional miles, per tax year. These rates are the same whatever road fuel your car uses, including for electric cars. If you work for yourself, you can use these mileage rates to calculate the cost of the business journeys you take in your own car, which is generally easier than working out the business proportion of the entire running costs of the vehicle. TAX PLANNING TIPS | May 2023 9 Tip Keep accurate records of all business journeys you take, including the distance and reason for each journey. There are apps which you can download on your phone to make this easier. All those short trips to buy business supplies or visit customers add up. EXAMPLE On 6 April 2023, TW Ltd provided its director, Elaine, with a brand-new electric car which has a list price of £27,000. TW Ltd also pays for car insurance, servicing and any repairs. TW Ltd can claim a deduction of £27,000 plus the related running costs when calculating its trading profit. The taxable benefit for Elaine is £540 in 2023/24. If she is a higher rate taxpayer, the tax cost of using the car for the entire year will be just £216.
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