Use all available business tax breaks to save money on taxes

Tax returns UK

Use all available business tax breaks to save money on taxes

If your startup or existing small business is not making use of all available tax breaks, you could struggle to show profits. These tax saving tips for small businesses may offer the assistance you need:

Tax saving tips

The following simple tips may provide some help in cutting liabilities to tax. It could also be a good idea to use professional accountancy services to reduce tax liabilities even further.

Sole traders and self-employed

If you are a sole trader, you can make a claim against profits for all items and equipment used for business purposes, even if you owned them before you actually started trading. You can claim a variety of expenses in your self-assessment return, mobile phone costs are tax deductible if the phone is registered in your business name. A proportion of the costs of running your own vehicle can also be claimed.

If you work from home or run an office out of your home, you can claim back some of the running costs of your home. However, if you claim more than the £4 weekly allowed by HMRC you may be asked to justify these costs in any future investigation.

Take advantage of a non-working partner’s income tax allowance, where possible. You and your partner can currently (2017/18) earn up to £11,500 a year, tax free. So, it could make sense to employ your partner in the business or transfer some allowable income over to reduce income tax liabilities.

Become a limited company

Lower rates of corporation tax amounting to 19% in 2017/18 may mean that turning your business into a limited company could save on taxes. What’s more setting up a limited company means you can pay yourself as an employee, yet still benefit from bonus dividend payments up to £5,000 each year which could save money on income tax and national insurance. You could also employ your partner in the business, if they don’t already work on a full time basis. Using your own vehicle for company business can be more affordable than opting for a company car and you can claim back for all your mileage through your business expense account.

Use capital allowances

If you plan to purchase new plant or machinery, buying them prior to the end of your current financial year allows you to set 100% of up to £200,000 in costs against the year’s profits. Capital allowances are the allowable tax deductions you can make for business equipment.

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