The benefits of tax-efficient products for businesses are vast. Not only can companies to save money on their taxes, but they can also improve their bottom line and make it easier to grow. This article will explore different tax-efficient products available to businesses and discuss how each can help your business succeed.
Do Forex Trading Using Spread Bets or CFDs
If you are a business owner, one way to make your business more tax efficient is by doing forex trading using spread bets or contracts for difference (CFDs). Spread betting and CFD trading is derivatives instruments that allow you to speculate on the movement of currency pairs without owning the underlying currencies.
When you trade with a spread bet, you are essentially betting that the currency pair will rise or fall in value. If your prediction is correct, you will make a profit. However, if your prediction is incorrect, you will incur a loss. CFD trading works similarly, except that you can also take advantage of leverage when trading CFDs. Leverage allows you to control more currency than you have invested, magnifying your profits and losses.
Both spread betting and CFD trading are tax-free in the UK, meaning that any profits you make will not be subject to income or capital gains tax. This makes these activities extremely tax efficient for businesses. However, you need to learn about forex trading before starting out. You can look for comprehensive forex trading training courses to get started. These courses are designed to help beginners and even amateurs become more proficient in forex trading. After taking these courses, you can become confident and make better trading decisions to reduce the chances of losing.
Use an Enterprise Investment Scheme
Another way to make your business more tax efficient is by using an Enterprise Investment Scheme (EIS). An EIS is a government-backed scheme that provides tax relief for investments made into small, early-stage companies.
If you invest in an EIS-eligible company, you can claim income tax relief of 30% on the amount you invest, up to a maximum of £1 million per year. In addition, any profits you make on your investment are exempt from capital gains tax.
This makes EIS-eligible investments extremely tax efficient for businesses, as they can help reduce your taxable income and grow your capital.
Invest More in Marketing and Research and Development
If you want to make your business more tax efficient, it is also worth considering investing more in marketing, research, and development (R&D). This is because expenses incurred on marketing and R&D can be offset against your company’s taxable profits.
This means that if your company makes a profit of £100,000 and spends £10,000 on marketing and R&D, your company will only be taxed on £90,000 of profit. This can significantly reduce the amount of tax your business has to pay.
It is also worth noting that the government offers enhanced tax relief for expenditure on R&D. If your business spends £10,000 on R&D, you can claim back an additional 130% of this amount — meaning you would only be taxed on £60,000 of profit.
Consider an Employee Share Scheme
Suppose you are looking for a way to reward your employees and make your business more tax efficient. In that case, you may want to consider an employee share scheme. An employee share scheme is a tax-efficient way for businesses to give employees an ownership stake in the company.
There are two main types of employee share schemes:
Share Incentive Plans (SIPs) — SIPs are a type of employee share scheme that allows employees to buy shares in the company at a discounted rate. Employees can also receive free shares from the company, as well as bonus shares if the company meets certain performance targets.
Enterprise Management Incentives (EMIs) — EMIs are a type of employee share scheme that allows employees to receive shares in the company in return for giving up certain employment rights.
SIPs and EMIs are tax-efficient ways to reward employees and give them an ownership stake in the company. In addition, they can also help to motivate and retain employees.
Use a Pension Scheme
Another way to make your business more tax efficient is by using a pension scheme. A pension scheme is a long-term investment vehicle that allows you to save for retirement. There are two main types of pension schemes: defined contribution (DC) and defined benefit (DB).
With a DC pension scheme, the amount you receive when you retire depends on how much you and your employer have contributed to the scheme and the investment returns achieved.
With a DB pension scheme, the amount you receive when you retire is based on your salary and length of service.
Pension schemes are a tax-efficient way to save for retirement, allowing you to make contributions from your pre-tax income. In addition, the investment returns achieved on the pension scheme are also exempt from tax.
There are many ways to make your business more tax efficient. By using products such as spread betting and CFDs, investing in an EIS-eligible company, or using an employee share scheme, you can help to reduce your taxable income and grow your capital. A pension scheme is also a great way to save for retirement tax-efficiently.