Six Tax Saving Tips for Your Small Business

  • Save some tax
  • Don't miss allowances
  • Keep more money

Michael Godsmark,

July 12, 2018

Running a small business is hard enough, and the last thing you want to see is your hard-earned profits lining the pockets of the tax office.

Here are some quick tax saving tips (some obvious, some less so!) that can help to bring that dreaded tax bill down.


Know your expenses

While you can’t just claim expenses willy-nilly, don’t forget you can claim flat rate expenses for working from home and mileage (if you use cash basis accounting). In some cases you can expense some items bought for the business before you started trading as a sole trader.


Claim your allowances
Are you married or in a civil partnership and eligible for Marriage Allowance but haven’t claimed it yet? If your significant other earns under the personal tax threshold (£11,850 for 18/19), you can transfer some of their personal allowance to you. It can save you up to £238 each year, and it can even be backdated. Check out our blog for more details.


Sole trader or limited company?

Saving tax by setting up as a limited company is becoming more difficult, but under certain circumstances it can mean you save more money in the long-run. You can draw some profit out of a limited company as a salary, and the rest as dividends, which are not subject to National Insurance payments. If your partner also works for the business, they can also be paid in this manner and depending on their income, this can increase their tax savings too. It’s best to seek professional advice before taking the plunge, as this area can be complicated.


Contribute to a pension

The government will provide tax relief on any payments made into a pension, so saving the most you can for your future can have an positive impact on your tax bill. The amounts vary according to your earnings and the rate of tax you pay, and there is a maximum amount of £40,000 per year that will apply for tax relief but it all helps! Full details in easy-to-understand terms can be found here.


Get VAT savvy

So many businesses lose out on VAT payments because they’re seen as unnecessarily complicated. If your turnover is under £150,000 per year, you can join the flat rate VAT scheme where you pay a single rate of VAT at a fixed percentage – this percentage varies according to what industry you’re in. You can’t reclaim VAT on purchases, but you do keep the difference between what you charge your customers (20%) and the actual amount you pay to HMRC, so it could really work in your favour under the right circumstances.


Have a great working relationship with your accountant

Your accountant is best placed to know the latest news, rules and legislations that could affect your business, or save you money! Keep them up-to-date with how things are going, and let them know of any changes that could affect you and your finances.


UK taxes can be complicated to navigate. For a more in-depth view and bespoke advice on how to reduce your tax bill further, have a chat with us today.





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About The Author

Michael is an enthusiastic and cheerful individual who, when not hard at work, enjoys mountain biking, cooking curry and travelling to new places.


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