[csomar]

I'd do the following:

1- Push as much expenses as legally possible to the business. Lease (buy a car on a lease). Depending on the country, there might restrictions on how luxurious the personal/business car is. By leasing you deduct the interest. So there is literally no reason why you'd not do it.

2- Only "pay" yourself the minimum required. That is, how much is your personal rent, food and other. Pay yourself that. Don't pay yourself from dividends. Make yourself a salary. That can be helpful if you are getting a loan on the business and on your personal account.

3- Do not pay dividends if you made profit. Always re-invest or suck profits on some way or another. This will make your tax rate effectively 0 but you'll notice that the government has always ways to suck in taxes.

I'm not in the US, so YMMV.

[sokoloff]

> Lease (buy a car on a lease). By leasing you deduct the interest. So there is literally no reason why you'd not do it.

It is almost guaranteed that I pay less to drive my 2005 Honda CR-V (paid entirely with taxable dollars) than a business owner pays to lease a newer Honda CR-V paid with pre-tax dollars. (So, that's one reason why you might not lease a car for your business.)

[jjeaff]

Plus, you are likely to fall on the wrong side of an audit of you expense your vehicle as a freelancer. Even visiting clients is not going to be considered a deductible use, just as an employee, going to and from work is not deductible.

[sokoloff]

Driving to and from your principal place of business is commuting (non-deductible) mileage.

If your principal place of business is your home office, then driving to/from additional client sites likely is a business expense.

[jjeaff]

Yes, I should have specified that I was speaking in the context of someone who is working at client's offices on a regular basis (in which you would have enough mileage to make a difference when it comes to deducting the expense). If you primarily work at home and you occasionally visit clients for meetings and updates or sales calls, then you should be fine deducting the mileage.

But if you are the type of freelancer that goes and works on site on a regular basis for your clients, then the IRS will likely try to assert that your client offices are actually your "place of work" and driving in to see them is merely a non-deductible commute.

[acct1771]

Why's that, again?

[jimnotgym]

Please take care with this advice

1) This may not be true. In most countries you would get a capital allowance that means you could make this saving even if you buy the car outright. There are also different kinds of lease that have different tax effects. In the UK VAT on a contract hire is 50% disallowed if you use the car personally for instance. Another reason this might be a bad idea, driving the companies car for personal use may be a 'benefit in kind' and taxable at a high rate. In many situations it is better to buy the car personally and record business miles and claim it on expenses at a government approved rate per mile. Talk to an accountant, it depends on several factors.

2) Many countries have minimum wage legislation. Don't pay less than that!

3) This is far too general to be true. If you can afford it and are planning an exit then leaving profits in a company can be great. This presumes that there is no better user for the money, which is not something you can generalize about.

Disclosure: I'm in Finance, but not a tax specialist.

[ownagefool]

You can pay yourself less than minimum wage as a director/office holder.

https://www.gov.uk/hmrc-internal-manuals/national-minimum-wa...

Still, you're right. Talk to an accountant. I use these guys: https://www.maslins.co.uk/

[jimnotgym]

And from the first paragraph

> The national minimum wage does not apply to company directors unless they have contracts that make them workers as defined in section 54(3) of the act.

I suggest if you are a single freelancer in the UK you may easily fall foul of that. Remember employment contracts can form without you writing them down. I know of cases where this has happened. If you only come into work for board meetings then sure, avoid minimum wage.

But then if you are a single freelancer in the UK you will already be talking to an accountant to discuss IR35...

[ownagefool]

Yeah, I've read it.

I'm not overly worried about an implied contract between myself and the company I own and direct. It's also generally the advice of accountants and legal professionals that it is fine to operate this way.

Also, snark aside, I get my contracts reviewed by QDOS, act outside and have an accountant. Anyone considering being a freelancer or contractor in the UK needs to be aware of IR35 and should get an accountant. Mines is https://www.maslins.co.uk/

[csomar]

Jim, I think specific advice will be useless and potentially hazardous since different countries/state/years will have different legislation.

I guess I get it now when some here comment: Check a lawyer. Check an accountant.

Better advice (or what I'm doing):

1- Check the laws/rules yourself. Just get a rough idea.

2- Suggest your creative ideas to your accountant and see if he agrees.

3- If your accountant is not aggressive in saving you taxes, maybe it is time to shop for a new accountant.