Questions to ask your accountant about business tax strategy

When it is about maintaining your business finance, consulting an accountant is always a great idea. Hiring a business accountant is a vexing process, and if the main reason is handling business tax, you need to be sure about the candidate’s skills, knowledge, and expertise.

A business tax strategy is a legitimate way to reduce taxes for a financial year regardless of your business situation. An accountant specialising in handling taxes can help you create a tax strategy that includes tax exemption, deductions, and government benefits.

However, if you are meeting your accountant for the first time to discuss business tax strategy, you can ask the following questions:

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How can you help me with tax?

Accountants play an invaluable role during tax season. They help you understand how much tax you owe to HMRC and how much you can reclaim for business expenses from HMRC. Understanding the process of reclaiming input tax paid on goods and services used in business can help you lower the company tax bill and help you save your income.

Additionally, they will help you discover what expenses you shouldn’t be claiming and ensure you pay the correct tax amount to the government.

Does a change in business structure provide tax benefits?

The HRMC provides different tax rules for other business structures. Therefore, you must discuss whether you’re using the proper business structure with your accountant.

When starting your venture, you must decide whether to set yourself as a sole trader, a partnership or a limited company.

If you set up a business as a sole trader and generate profits over £50,270 for the tax year 2022/23, you would pay a higher tax rate of 40%. If you become a limited company, you can withdraw dividends. The first dividend withdrawal of £2,000 is tax-free and then pays a basic rate of 8.75%, a higher rate of 33.75% and an additional rate of 39.35%. However limited company pays a corporation tax on its profits.

Therefore, hire business accountant in London to help you structure your business- which is goof for the business and you.

Should I register for VAT?

It is not compulsory for all businesses in the UK to register for VAT unless their annual VAT taxable turnover crosses the VAT threshold level. The threshold level for 2022-23 is £85,000 per year.

However, if you are below the threshold level, you get an option to register your business voluntarily. Ask your accountant to explain the advantages of voluntary VAT registration and your VAT obligations.

What kind of taxes do I need to pay?

A business is liable to different taxes as per government regulations. These taxes have other criteria and payment schedules. Some of them are:

  • Corporation tax
  • Income tax
  • National Insurance contributions
  • VAT

Ask your accountant about your tax obligations according to your business structure and income. They will help you pay the correct tax within deadlines and avoid legal issues.

How to reduce my tax bill?

Business owners can deduct business-related expenses on their tax returns to reduce their tax liability. Some of the tax-deductible business items you can be eligible for are:

  • Home office deductions
  • Vehicles for business purposes
  • Business travel expenses
  • Employee expenses
  • Charitable contributions or donations.

If you purchase goods and services for business purposes, you can claim back the VAT you paid for them from HMRC. However, if the purpose is for a personal reason, you cannot claim back the VAT amount.

An accountant can help you understand the business tax deductions and identifies if you are eligible for them. It can reduce your tax liability.

Can a donation lower my tax liability?

An accountant with experience will say a Yes only when you donate to charities through the Gift Aid scheme or direct donations from your salary or pension through Payroll Giving schemes. Additionally, you can increase the tax-free allowance while making donations through a Gift Aid scheme and claiming the Married Couples Allowance. Under the Payroll Giving scheme, you don’t have to pay income tax but National Insurance contributions on the donation amount.

Can you advise me on tax deductions?

Ask this question to your accountant and see how promptly they reply. An accountant with years of experience or expertise in your industry can easily speak about the tax deductions. However, there can be specific changes in the tax deductions in the future, but they must stay prepared to help you in any situation.

What upcoming tax regulations do I need to know?

The HRMC keeps changing tax obligations and regulations for businesses. Therefore, if you are not aware of the new legislation, it can affect your business.

For example, HMRC is changing the way and how much companies claim R&D tax credits.

An accountant is responsible for keeping you up to date with any financial support schemes available and helping you in applying them. For example, several government financial support schemes were available for businesses during the COVID-19 pandemic. Firms without an accountant failed to take advantage of these schemes.

How to prepare for the tax year-end?

Tax seasons are the most hectic period of the year, and nobody loves to find themselves in a panicking situation at the end of January when struggling to find their documents and records.

Ask your accountant how they will be able to support you in keeping track of these records throughout the tax year. Submitting tax returns will become easier if you start preparing from the first day of a tax year. Additionally, they will provide you with necessary updates on new tax laws or regulation changes.

How to keep my records for tax season?

Whether you are using paper forms or an online service to file your tax return, keeping business transaction records and documents is essential. They are evidence of the information you mention in your tax return. These can be your bank statements, receipts, contracts, financial statements, general ledger, check registers, Insurance documents, payroll records, etc.

Keep these documents handy while filing taxes and in case of an audit. Consult with your accountant on keeping these records and for what period.

How can I improve my tax situation?

A slight change in your spending and habits can create a massive difference in your future tax bill. An accountant can advise you on transforming bad habits into good ones by analysing the information or previous tax bills.

Accountants will help prepare the best financial strategies and cash-flow analysis to improve tax situation. If you miss out on some tax deductions or forget to reclaim business expenses on your previous tax return, accountants will spot the errors and help you correct them.

What things can I try this year to reduce tax?

After paying a big tax bill, it is obvious to ask accountants what you can do to reduce business taxes for the upcoming tax season. The accountant may suggest you to

  • Take advantage of the annual investment allowance,
  • If you are married and then you can consider making your spouse a business partner and take advantage of both personal allowances,
  • Claim tax relief, and others.

There are several other ways to reduce business tax, and an accountant can only help you identify them.

Hire Tax Accountant

Work with UK-based Experts for tax, audit, accounting, payroll, & EIS/ SEIS needs.

Have a question? Call us on
0203 983 8100
Monday to Friday 9am – 4:30pm

Wrapping up!

When hiring an accountant, you must make sure they are the right choice. Asking them questions during the hiring process will give an image of their work quality and standards.

You can also add a few more questions like how much they will charge you, their experience in your industry, education, training, and others. It is good to ask questions to spot trends and differences in different candidates’ answers to make the right decision.