If you run a one man company you may already know that you can no longer claim the employment allowance. This will be disappointing for some as it was increased to £3,000 per annum from 6 April 2016. If we operate your payroll, you may have noticed that we’ve already reduced your salary so it’s as tax efficient as possible, based on the new rules.
One man companies can’t claim but two man companies can, so our advice is to look at taking on a second employee, possibly your spouse or child. For the purpose of claiming employment allowance, the second employee must earn over £156 per week and must actually do some work for this to be a valid expense.
This level of salary can work very well as part of a family company’s tax planning, so it isn’t onerous to work into the overall tax planning. However, please bear in mind that just because there is a £3,000 allowance available, it isn’t always the best option to make sure it is all claimed.
If you’d like our advice on any aspect of tax planning please do get in touch on 01782 279615.