Hundreds of new micro-businesses will be created in Shropshire this year, and many of the new company bosses are likely to be dipping into their own pockets to pay for basic office equipment and computer hardware, however, this usually turns out to be the least tax-efficient approach.
Dyke Yaxley Director, Marie Bramwell, said: “As a director of a new company, you find there is a never ending list of equipment required to get up and running.
“Chances are, you will be meeting some of these costs from your own pocket – buying the goods yourself, then simply allowing your company to use them.
“But this is not always the most tax-efficient way of approaching things. If your company is short of cash, it is often better for you to lend it the money, then get the company to repay you when it can afford to.”
Marie explained: “When a director buys an item of equipment they use to do their job, like a laptop computer, they can claim tax relief known as ‘capital allowance’ just as the company can.
“But if the company needs a van or car for staff purposes, it is best for the director to lend the money for the purchase to the company and the company claim the capital allowances.
“On the other hand, if you buy furniture for your home-based office through your company, it will receive tax relief at 20%. However, if you are a higher-rate taxpayer and you buy it yourself, you can get relief up to 45%.”
Marie added: “The message is – don’t always assume that one way will always be the most financially-efficient.
“You need to compare the amount your company may save by not using its own money, against the costs that you will incur.
“In our experience, unless the equipment in question has a particuarly high resale value, buying goods through the company is almost always the most tax efficient.
“Setting up a new business can be a costly experience, and it is important to seek expert advice to ensure you are making the most of the system to claim the maximum levels of tax relief.”
DY Director, Marie Bramwell
