Making too much profit as a partnership

[fabi]

From April 2005 to date we have made about £60k profit after all the usual expenses have been taken into account. As a result in growth we plan to go ltd to provide some form of protection against a big client being unable to pay, plus as a way to reduce out tax bill. Can someone please tell me is there a way to legally reduce the tax payable on the partnership profits ?. According to my maths this would be around £7K for both partners

[Huw Williams]

Get an accountant - his fees are bound to save you money. Every pound you spend on accounting is tax deductible.

More seriously if you want to save tax you will need to spend money, so it is a question of what you want to spend it on and then looking at the most tax-efficient way of doing it.

In the right circumstances the outlay can be quite low. For example giving £100 to a relief organisation will only cost you £60 if you sign the gift aid forms (and are paying 40% tax) ...

Putting money into a pension scheme has similar tax breaks.

The government is also keen on you putting money into new businesses through their EIS and VCT schemes. But these are usually investments and are unlikely to be available for investing in your own business.

Spending money in the business can be a good idea - if the cash is available you could update your equipment.

Or if you just spend it on yourselves you will have reduced the savings income which will be taxed.


Huw Williams
Nottingham

0115 914 6846

enquiries@huwwilliams.co.uk