No one wants to pay more tax than they have to. But let’s be honest. Trying to figure out tax rules can be complicated, stressful and boring.
Here are some basic tax saving tips for small business owners that can help you make the most of the tax relief options available.
If you’ve just started out, doing business as a sole trader is usually the easiest and best option.
But as your profits grow, changing your structure could reduce your tax bill. Partnerships and limited liability companies both have their pros and cons. So, it’s worth speaking to an accountant for advice on which structure would work best for your business.
One in four small businesses don’t claim expenses under £5, because they think it’s not worth the effort. This is a mistake.
It may be tempting to leave small amounts out of your tax calculation. But you’d be surprised at how quickly they can add up.
Tracking even the smallest expenses doesn’t require much effort. Many online accounting software programmes allow you to upload receipts. Simply snap a photo with your phone, upload it and the expense will be automatically added to your expenses log. That way, you won’t leave anything out.
Certain benefits are tax-free for your employees. And you can use them to reduce your tax bill.
You can claim back 100 percent of the first £200,000 you spend on large business purchases each year. So, if you buy eligible capital items before year-end, you can offset the entire cost against your profit for that year.
HMRC calls eligible items plant and machinery. They include:
Salary sacrifice schemes are a win for you and your employees. Your employees pay less tax and national insurance. And you save on employer’s national insurance contributions.
Childcare vouchers and cycle to work are the most popular schemes.
Contributions to a pension scheme are tax-free. As a plus, by investing more in your pension, you can reduce your personal tax bill.
By law, you have to offer your staff a workplace pension scheme if:
As a general rule, your employer contributions to a registered pension scheme are tax deductible.
If you work from home, you can claim a tax deduction for part of your household bills. Expenses you can deduct include:
Does your husband, wife or civil partner pay a lower rate of tax?
If so, it’s worth considering transferring some of your income-generating assets to them. Income-generating assets include any investments and the profits from a rental property.