Tas' Top Ten Tax Tips

Overview

This guide covers ten essential tax planning principles for company directors and founders. It’s designed to help you stay compliant, manage your finances efficiently, and make informed decisions about withdrawing funds, saving for tax, and optimising your remuneration strategy.

1. Understand Corporation Tax

Companies pay Corporation Tax on their net profits at a rate between 19% and 25%, depending on the level of profit.

• Corporation Tax is due nine months after your company year-end.
• The earlier we receive your company’s financial data, the sooner we can calculate your tax position and help you plan to minimise liabilities.

💡 Tip: Ring-fence funds for Corporation Tax in a dedicated business savings account.

As a rough guide, set aside around 22% of your net profit. You can view this in Xero under:

Reports → Profit and Loss .

2. Keep Business and Personal Finances Separate

Your company is a separate legal entity, so personal expenses must be paid from your personal bank account.

If you use your business account for personal spending, we’ll need to make accounting adjustments — which can complicate your records and draw HMRC scrutiny.

💡 Tip: Think of your company account as belonging to the business, not to you personally.

3. The Four Main Ways to Withdraw Money

There are four common ways directors can withdraw funds from a company:

4. Combine Salary, Dividends, Loans and Pensions Strategically

The most tax-efficient approach is usually a combination of a low salary and dividends, with occasional pension contributions or director’s loans if appropriate.

We’ll advise on the right structure for your circumstances, but as a general guide:

• A low salary (typically £8k - £12k) minimises NICs.
• Dividends supplement your income tax-efficiently.
• Pension contributions are ideal for long-term planning.

5. Understand the Rules on Dividends

Dividends are taxed at lower rates than salary because no National Insurance Contributions (NICs) are due.

However, dividends:

• Can only be paid from retained profits.
• Are not tax-deductible for the company.

If your company doesn't have sufficient profits, you cannot legally declare or pay dividends.

6. Consider a Separate Director’s Pension Scheme

If you’re a director paying yourself a low salary, you may not qualify automatically for your company’s workplace pension scheme.

Instead, consider setting up a director-specific pension and have the company contribute as the employer.

• Employer contributions can be up to £60,000 per year (subject to annual allowance).
• This approach is generally more flexible and tax-efficient than employee contributions.

💡 Tip: Even if you’re not ready to contribute, open a pension early to start accruing allowance carry-forward.

7. Make Use of the Mobile Phone Exemption

Each director or employee can receive one company-paid mobile phone - completely tax-free.

This applies even if the phone is used for both business and personal purposes.

🔗 See our full guide on company mobile phones

8. Open Two Business Savings Accounts

To stay organised, open two separate business savings accounts:

• One for Corporation Tax
• One for VAT

Set aside around one-sixth of your sales to cover VAT.

For example, if your monthly sales are £1,200, save approximately £200.

You can check your current VAT position in Xero under:

Accounting → VAT Return .

9. File Your Personal Tax Return on Time

As a director or shareholder, you may need to file a Self Assessment tax return each year, typically due by 31 January.

You’ll usually need to complete a return if you:

• Receive dividends or other income not taxed via PAYE.
• Have a director’s loan or other taxable benefits.

Tax is generally paid in two instalments:

• 31 January (for the prior tax year)
• 31 July (for advance payments on account)

If your only income is PAYE salary with no dividends, a return is usually not required.

10. Review Your Business Insurance

Ensure your company is properly protected with the right insurance policies:

• Employers’ Liability - mandatory if you employ staff.
• Professional Indemnity - protects against claims for professional errors.
• Public Liability - covers third-party injury or damage claims.
• Business Contents —-covers equipment and assets.

For convenience, you can compare quotes online via brokers like PolicyBee or Superscript.

💡 Advanced cover: Consider Key Person Insurance or Director’s Insurance for additional protection.

🔗 See our full guide on Business Insurance

💡 Final Thoughts

Good tax planning is about foresight, not last-minute fixes.

By keeping your finances structured, maintaining clear separation between business and personal expenses, and making the most of legitimate reliefs, you’ll stay compliant while optimising your company and personal tax position.