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What exactly is tax relief?

Before you’re entitled to take a dividend from your company, you are required to apply Corporation Tax on its profits. Your allowable business expenses then reduce the amount of profit which is liable for Corporation Tax. So, more allowable expenses mean less taxable profit. Note, however, that your dividends would also be affected by PAYE salaries, Flat Rate VAT and income thresholds.

To do your expenses properly you need to keep accurate records of everything. Bear in mind that you’re legally bound to keep company records for six years after their respective financial year-end, and are therefore still liable to incur a possible £3,000 fine during this period.

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