Why saving tax is so important to a business owner who wants to grow…
Author: Russell SmithJune 3, 2012
When I catch up with clients, I often ask them whether they are concerned with their tax bills. In the vast majority of conversations, the answer is yes. In reality though, there are many things that will take priority over saving tax to a business owner.
I guess there are few reasons for this. Firstly, business owners are perhaps more used to growing revenue. To me, managing costs is as important as growing revenue and tax is a cost to a business. However, many see tax as an inevitability. Secondly, I think business owners are so used to the accountant’s reactive attitude to tax that they don’t believe anything different can be done.
When polls are commissioned on the subject of tax, it is often found that the vast majority believe in tax and want to pay tax. However, a business owner can needlessly overpay tax just be being ill informed or not giving the tax planning the attention it deserved.
I spent 5 hours the other night planning my own tax and managed to save over £3,000 tax just by timing my dividends correctly. Without those 5 hours of attention, I would be £3,000 worse off.
I now have the choice of what to do with the £3,000. Like most business owners with business growth at the top of the agenda, the paradox is that the money that is saved on tax rarely is used to deliver an extra dividend but more so to invest in the growth of the business.
This is ultimately the point. If you can save tax, it can give you extra money to take out for yourself but to grow a business you need as much cash as you can get your hands on. If tax can be saved and cash to be freed up for business growth, this will give you a boost that some of your competitors with less proactive accountants will not have.