Business Tax Tips for Small Businesses

No one wants to pay more tax than they have to and when you are running a small business every penny counts! So here are 5 tops tax tips that can help you save on your Corporation Tax bill….

Claim Your Expenses

All too often a Director will pick the bill for a meal, pay for something online with a personal credit card or forget to claim business mileage when they have travelled to see a client.  Come up with a routine for noting down and storing all your receipts ready for your accountant at year end time.  Parking, congestion charge, tolls and mileage are all claimable against your tax and every little bit will not just reduce your tax bill but you can also claim the money back tax free from your business!

Use of Home

You may opt to run your business from home, if so there are provisions to claim back a cost for doing so. If you choose to work from your home then there are rules that will allow you to claim an amount for the running costs of doing so from your home as a portion of your household bills such as gas, water, electricity or rent. Make sure you have an idea of your household running costs to discuss with your accountant at tax return time as they will help you work out how much you can claim against your taxable income.

Always seek professional advice before making this claim if you own your own home because if you make too large a claim you could find that portion subject to capital gains tax if you ever sell your home.

If you rent an office but choose to do minimal work at home, then you may be entitled to claim a nominal amount set by HMRC – currently £2 per week.

Consider How/When You Buy Equipment

Computers, desks and office furniture are all allowable business costs but did you know that although their treatment is different to day to day expenses you may still be entitled to deduct the cost of these purchases in full against your Corporation Tax? Under the capital allowance rules, business are entitled to claim annual investment relief ‘AIA’ on tools and equipment (currently up to £200,000).

If you are approaching your year end, are considering purchasing equipment and have the cash available then consider buying this before year end to you receive the full tax relief sooner rather than later.

Contribute into a Pension Scheme

If you do have cash available, considering contributing into your Workplace Pension Scheme.  Generally these payments are tax allowable for the Company and depending on the rules of the scheme, you may not need to pay personal tax until you begin to draw on your pension in later life.

R&D Tax Relief 

If you meet the criteria, your business may qualify for tax relief on Research & Development costs.  The tax relief on allowable R&D costs is 230%. This means that for every £100 of qualifying costs, your company could reduce your CT by an additional £130 on top of the £100 spent.

If your company has an allowable trading loss, this can be increased by 130% of the qualifying R&D costs – so that’s £130 for each £100 spent. This loss can be carried forward in the normal way, but only if you choose not to convert it to tax credits.

Find out more about R&D Tax Relief here.