Top 10 Tax Saving Tips For Small Businesses

1. When setting up as a sole trader, you can claim against your profits for items used in your business even if they were purchased prior to commencement of trade.


2. The new capital allowance regime allows you an immediate 100% writing down allowance on the first £50,000 expenditure on eligible capital items each year. Therefore, if your year end is approaching and there are some plant and machinery items you are considering buying, committing to purchase prior to your year end can accelerate the entire cost against your profit of that year.


3. Consider your method of drawings from the business. If a limited company, paying a small salary up to the personal allowance and the balance as dividends is normally the most efficient method, however this is not always the case.


4. Put any mobile phone you have in the business name and all costs of the phone are deductible (you do not have to split business vs non-business calls).


5. Check that you are not caught by IR35 provisions. If you run a company which predominantly works for one or two clients, you may be at risk. If you believe this to be the case, contact an accountant immediately to discuss the situation and assess whether any action needs to be taken.


6. Make contributions into a pension scheme. Pension contributions tend to be deductible expenses for the company, and suffer no immediate tax charge on the individual. It's also always nice to know there'll be something to top up the oh so generous state pension when you do retire.


7. If you make a loss, there are various options available to you. Have a chat with your accountant to find out how to maximise tax relief. Sole traders can do a whole host of things with losses to obtain relief. Companies have less flexibility with losses, however it was recently announced that companies can carry back up to £50,000 worth of losses over 3 years (as opposed to the normal 1 year).


8. If you work from home you will be able to claim a deduction to cover part of your home running costs. HMRC allow (a modest) £3/week without requiring any evidence. This may sound small, but if you're a 40% taxpayer it will save you £62.40 per year with no additional effort required. If you believe the actual cost is higher (based on household expenses compared to proportion of home used for work purposes) then a bigger claim may be made, however this may require justification.


9. Carefully consider your options with regards to VAT. If you are below the threshold, it may potentially be worth registering anyway. This can be the case if your customers are all VAT registered themselves, or your sales are zero rated.


10. If you are registered for VAT, consider the flat rate schemes. These can make your life simpler, and if you don't make that many VATable purchases, they may save you tax as well.