As a small business owner, careful and strategic tax planning is crucial for reducing your end-of-year tax bill.
There many types of tax relief, expenses claims, allowances, and ways to minimise corporate taxes to make sure that you don’t pay any more tax than you need to.
With this in mind, we have pulled together our ten top tax tips to ensure you are not missing out on any tax savings which could help the overall financial health of your business.
1. Use your allowances – spend time planning
Making sure to use up any allowances you are entitled to, is the first step in reducing the amount of tax you need to pay.
Not all tax allowances can be transferred on to the next financial year, so in most areas it really is a case of ‘use it or lose it’.”
There are a few different types of tax reliefs and allowances available, which can reduce how much tax you have to pay. This is where an experienced accountant can work with you to make sure all your allowances are claimed if you’re eligible.
2. If you can afford to, make a pension contribution
Having a personal pension that you make monthly contributions into, will not only ensure you have sufficient funds for a comfortable retirement, but it also means you can benefit from a number of tax saving opportunities which can include things such as:
3. Think about timing
if you run your own business, timing and planning are key to maximising tax-saving opportunities.
You need to ensure you review your financial position prior to the year end and ensure that you are utilising all available allowances to reduce your tax liabilities and increase your profitability.
4. Flat rate scheme for VAT
The Flat Rate Scheme is an alternative way to pay your VAT to HMRC which can save you valuable time when it comes to your quarterly bookkeeping.
Instead of paying the difference between the VAT you charge customers, and the VAT you reclaim on business purchases, you can pay a fixed rate based on your total sales.
To join the scheme your VAT turnover must be £150,000 or less (excluding VAT), and you must apply to HMRC.
5. Bad debt relief
When you raise an invoice for goods or services to a customer, the VAT element has to be paid to HMRC on your next return.
But what happens if the customer has not paid? Paying tax on the money you haven’t received can leave you in a hole and be devastating to your company’s cash-flow.
The good news is if you meet the criteria, you can claim relief from the VAT on bad debts for the goods or services that you have supplied.
But it is essential that before you apply for Bad Debt Relief, you have exhausted all your options for recovering the debt, as you will be required to write the debt off in order to claim the relief.
6. Consider cash accounting for VAT
The amount of VAT you pay HMRC is the difference between your sales invoices and your purchase invoices. You have to report these figures and pay any money to HMRC even if the invoices have not been paid.
With the Cash Accounting Scheme you:
Your accountant can advise you more on this and whether your business could be eligible for this scheme.
7. Rent a room scheme
Renting out a room in your house can be a good way of making extra money, tax-free.
The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.
9. Switch to an electric company car
Benefits in Kind are non-cash-related items or services which are considered to be of personal benefit to an employee or Director in addition to their salary and must be declared to HMRC on a P11D form.
A company car is an example of one of these benefits.
Working out the tax charge on a company car can be quite confusing. This is done by working out the P11D value multiplied by the rate of income tax you pay, which depends on how much money you earn, and then multiplying this by the vehicle’s Benefit in Kind rate, which is based on its CO2 emissions.
The CO2 emissions rate is the key reason why electric cars are considerably more tax beneficial than petrol or diesel cars. Petrol or diesel cars can attract a CO2 emission of up to 37% whilst an electric car will currently be just 1% (although it was recently announced this is rising to 2% for 2022/23 and 2023/24).
10. Charitable donations tax relief
Donations made by individuals to charity or to community amateur sports clubs are tax free.
The tax goes to you or to the charity. How this works depends on whether you donate:
This also applies to sole traders and partnerships but there are different rules for limited companies.
10. Get an Accountant 😊
Hiring an accountant to look after your company’s affairs, make sure you are tax compliant, reduce mistakes that could potentially save you money and provide you with valuable business advice, will give you the time back to concentrate on what you’re good at…. running your business.
How Blue Spire can help
At Blue Spire, we provide services for all your business needs such as, Accounting, Bookkeeping, Taxation, Payroll, VAT, and Business Growth.
We want to make your life easier and that starts with making sure you feel welcome and reassured from day one.
| If you would like to speak to someone about making sure you not missing out on any tax savings, then please get in touch with us today and we will be happy to help. |
