If you run a small or medium-sized business, tax planning can help your profits go further. By leveraging certain tax relief options, maintaining compliance, and implementing strategic financial practices, your business can enhance its profitability and reduce tax liabilities.
If you want a better idea of how to maximise your business’s savings, then keep reading this short guide.
Understanding your tax obligations
When running a business, one key thing you need to be aware of is your tax obligations. Typically, this involves seven different types of taxes, including: Corporation Tax, VAT, Income Tax, National Insurance Contributions, Dividend Tax, Capital Gains Tax, and Business Rates.
Of course, the actual taxes you need to pay will vary depending on the size and type of business you operate.
Utilising available tax relief and allowances
As a business, you can get certain tax allowances and relief from the government. In short, this reduces the amount of tax you need to pay in any given year, provided you meet certain criteria.
The various relief and allowances you can apply for include, but aren’t limited to:
Annual Investment Allowance
The Annual Investment Allowance, or AIA, allows you to deduct the full value of certain items and machinery from your profits before tax. This lessens your taxable income and reduces the amount you’ll have to pay.
Research and Development Tax Credits
Designed to support companies that actively work on innovative projects in science and technology, you may qualify for tax relief if your project seeks to advance a scientific or technological field.
Employment Allowance
This initiative helps employers reduce the amount of National Insurance they pay when they run payroll. By doing this, it becomes more cost-effective for small businesses to hire the people they need.
Implementing effective record-keeping and compliance practices
If you want to make the most of the available tax relief and ensure you comply with HMRC’s regulations, then you need to maintain accurate and detailed records. One of the easiest ways to do this is by utilising digital tools and carrying out regular audits. These tools can be used to track and file various expenses, helping you to maintain accurate records and share them when needed.
Of course, it can be difficult to manage and fully understand the tax process. Rather than relying on a digital tool, you might want to contact a tax specialist instead. These experts fully comprehend the nuances of tax and how best to help your business retain as much of its profits as possible. They may even be able to offer additional advice on how you can plan certain expenses to take advantage of the government’s various schemes.
