There are plenty of legal ways that you can reduce the amount of tax your business pays. With minimal effort and just a few simple checks, you can boost your take-home earnings by taking advantage of various tax reliefs and government schemes.
Small Business Can Save on Tax
Calculate your taxes accurately
Keep all your receipts, invoices, and order confirmations for everything relating to your business ready to be used when filing your tax return.
Add VAT Calculator | Remove VAT Calculator is a great, free tool to help you work out your taxes and make sure you apply for the right amount – you do not want to miss out on anything that may be owed to you!
When filing your taxes at the end of the tax year you should include all the various expenses that you have incurred through the running of your business.
Expenses can include fuel costs, phone bills, running costs for your home office, marketing materials and much more. The cost of these can be deducted from your profits which will reduce the overall tax that you owe and could even cause you to be owed payment from HMRC!
Find out more about what counts as a tax-deductible expense here.
Meet the tax return deadline
If you are a business owner or self-employed then you may need to submit a self-assessment tax return and missing the deadline can be a costly mistake. Missing the deadline is an automatic £100 fine, even if you do not owe any tax!
Think out side the box
Most business owners don’t think about it, but what about consider incorporating in Hong Kong? According to the Economic Freedom of the World 2021 Annual report, Fraser Institute ranked Hong Kong as the world’s freest economy, surpassing 164 other major cities and countries.
Check your tax code
Your tax code is what HMRC uses when taking your tax payments from your salary – you will find this on your payslip.
Make sure you check this tax code every year to be sure that it is the correct one for your situation. You can get further information regarding tax codes from the government website.
If you do find that you are on the wrong code, then you could be entitled to pay less tax going forward or even a refund of how much you have overpaid. This may happen if your income unexpectedly falls one year.
Cash-flow boosts for self-employed
As a business owner, you can choose when your fiscal year ends. So choose wisely. If you pick an accounting year-end date that is earlier in the tax year.
Then you will give yourself more time to pay tax on your profits which means that as your profits increase then your tax bill will rise more slowly.
This can help reduce the chances of getting surprised by a tax bill you were not prepared for.
Self-employed car costs
In general, you can usually claim back the running costs of a car that you use for your business, although you cannot claim the cost of buying one. If you use the same car for personal use, then you can claim a proportion of the total costs.
You will need to add up all your annual motor expenses and then work out the percentage of business miles you did – or you can claim a fixed rate mileage allowance for business travel.