Are you looking for small business tax UK? Saving money on small business taxes UK is one of the top priorities for business owners.
Moreover, to be a successful entrepreneur, you must know the boundaries of what you can do. Also, you should know the best ways to go about the tax-saving.
At the end of every tax year, most businessmen think about how to save tax on small businesses. If you are one of them don’t get stressed.
Here, in this article, I will wrap together 5 essential tax-saving tips for UK small business owners. So, stay with me and continue reading this article till the end!
5 Essential Tax-Saving Tips for UK Small Businesses
1. Keep Good Records
This tip for tax saving may sound simple, but it is one of the most effective ways to save tax.
To get tax deductions on your small business, you must keep records of what you have spent where you have spent, and when.
It is much easier to lose most of the receipts of your expenses, especially if you do not pay them from your bank account. These may include:
- The fuel charges that you have paid in cash
- The purchases that you have made through your account or by cash
- The business expenses that you have paid by cash or from a personal account while away from the business location.
So, you must keep track of all your business expenses, it will help you in claiming legitimate deductions.
So, keeping track of all the expenses will help to reduce your taxable income. These expenses include office rent, advertising, utilities, and more.
You must keep all the receipts and invoices of these business expenses. However, you must keep your expenses apart from business expenses.
2. Claim All Allowances and Deductions
You must have the entire knowledge about what allowances and deductions your business is entitled to.
So, you must claim all those allowances and deductions. These allowances include capital allowances for machinery and equipment purchases.
Also, you can claim expenses including business-related travel, accommodation, and meals. The deductions that you can claim include any charitable donations made by your business.
3. Use The Annual Investment Allowance
Before tax, you can deduct the full cost of qualifying plant and machinery from your profit. This is up to 1 million pounds per year, so you can implement this tax-saving tip in your small business.
You can take advantage of the Annual Investment Allowance for this valuable tax relief.
The Annual Investment Allowance applies to most of the plant and machinery including office furniture, computer equipment, and more.
4. You Can Use The Employment Allowance
If you have employees working at your company, you can reduce your Employers’ national Insurance Contribution by up to 5,000 Pounds each year. You can use this tax-saving tip, Employment Allowance.
Employment Allowance applies to most of the employers in the UK who pay Class 1 National Insurance Contributions.
You can claim this allowance through your payroll application or HM Revenue and Customs.
5. Take Advantage of The VAT Flat Rate Scheme
If your business’s annual turnover is less than 150,000 Pounds, you are eligible for this VAT Flat are scheme.
This is one of the most effective tax-saving tips, which can simplify your VAt accounting. So, this scheme will help you to save money on your VAT payments.
instead of calculating VAT on your sales and purchases, you need to pay a flat rate percentage of your turnover to the HMRC.
However, the actual percentage depends on your business sector. Also, you get to keep the difference between what you have charged to your customers and what you pay to the HMRC.
Small Business and Tax Planning
It is very clear to us that small business owners are a little seasoned in this evolving business landscape. However, still, they are still continuously struggling to build up their ground.
Small businesses lie somewhere between startups and medium-sized businesses. So, small business owners need to be very careful in every aspect of their ongoing business.
Especially, if there are possibilities to cut some costs wherever applicable they should go for it.
As a business owner, you must keep open your third eye if there is little chance of saving even a penny. Finding ways to cut your expenses should be your top priority list.
One of the most effective reasons why you must be smarter enough with your money is because as a small business owner, you must deal with your taxes smartly. Thus, you can save a considerable amount of money.
Moreover, it’s one of the most important factors for every small business. This can make a huge difference between steady profitable businesses and one just surviving.
There are plenty of small business owners who pay extra taxes because they are unaware and ignorant about certain allowances and deductions.
The UK government always makes changes to tax obligations.
So, you need continuing upgradation so that any deduction or allowances cannot get missed.
FAQ
How much can a small business make before paying tax?
Ans: If you are a sole trader, you must pay tax on your profitable income. You need to start paying income tax once your business profit goes above your tax allowance. Your tax allowance is 12,570 Pounds in 2023.
What can I claim as business expenses in the UK?
Ans: Various costs you can claim as allowable expenses. Travel costs including parking, fuel costs, or train or bus fare; clothing expenses including uniform costs, and staff costs including salaries or subcontractor costs, and the things that you buy on sell including raw material or stock.
What small businesses are tax-exempt in the UK?
Ans: Various small businesses are exempt in the UK, including:
- Insurance, finance, and credit
- Subscription to a membership organization
- Education and training
- Fundraising events by charities
Conclusion
The tax world is becoming complex. The small business tax UK comes with its challenges. Having to part with your hard-earned money is quite difficult. However, understanding how to navigate this tax landscape significantly impacts your business growth.
There are certain ways that you can initiate to lower your tax burden. So, to help you with your taxes, I have created this blog on 5 essential tax-saving tips every UK small business owner needs to know.
You can go through this article and keep these tips in mind. These tips will help you save tax and enable you to keep track of your finances.
