Managing the finances and tax obligations of a small business on top of all your other responsibilities can seem impossible. We have put together some tax tips to help you legitimately and responsibly lower your tax obligation and increase your profitability. Make sure that you achieve your business goals sustainably and legally with our expert advice.
Keep accurate records and paperwork
The first step to all financial good practice is to keep detailed and accurate records. Tracking your business’ expenses will enable you to claim on deductions to reduce your overall taxable income. Make sure that the original copies of invoices and receipts are stored carefully to keep an accurate overview of expenses like rent, insurance, and bills. This is a good habit to keep in general and will make implementing the rest of our tips easier as well.
Remember to claim any allowances and deductions
You would be surprised at the number and range of expenses that can be legitimately deducted. Many businesses can reduce a significant amount of their tax liability by deducting the following.
- Business related travel including public transport, fuel allowances, parking, and accommodation.
- Office expenses ranging from utility bills to stationery purchases.
- Staff costs including salaries, subcontractor costs, uniforms, and personal protective equipment.
- Raw materials or stock items that you purchase to sell on might qualify.
- Equipment and machinery used to run your business.
A professional accountant can help you identify the legitimate deductions for your business so you can be certain you are doing everything correctly.
Consider the VAT Flat Rate Scheme
Businesses with an annual turnover lower than £150,000 are eligible for the UK’s VAT Flat Rate Scheme. This scheme simplifies your VAT payments by requiring you to pay a flat rate percentage of your turnover as opposed to calculating VAT based on each sale and purchase. The percentage varies depending on the industry you are in, but a qualified accountant will be able to help you identify the correct amount. This scheme allows you to keep the difference between the VAT you charge customers and what you pay HM Revenue and Customs.
Offset your losses against your profits
If you finish a tax year having made a loss you may be able to offset the losses against profits from a future tax year. This will often reduce the amount of tax that would normally be due in that future year. If you do intend to follow this route, note that the loss must be used in the first tax year you turn a profit in after the year of your loss. If it cannot all be used in one tax year, then it will be carried forward to the next profitable year.
Reduce your National Insurance with the Employment Allowance
The Employment Allowance can reduce your National Insurance contributions by as much as £5,000 per year. If your business employs staff and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year, you may be eligible. Each time you run your payroll you will reduce your NI contribution until the £5,000 maximum is reached unless you reach the end of the tax year first.
One of the best ways to ensure your business finances are being managed correctly, and that you’re paying the right amount of tax, is to work with qualified accountants. At Omer & Company Accountants, our skilled team navigate the complex world of tax law and identify the best money-saving strategies to keep your business thriving. We also take care of day-to-day bookkeeping and help prepare tax returns. To find out how we can help you and your business, contact our team by calling 020 8850 0700 or sending an email to email@example.com.