The amount of tax your business pays can be crucial to its prospects in both the long and short term. If you can slash your tax bill, then you’ll have more cash available to invest in the business.
Of course, when doing this kind of optimisation, you’ll want to stay on the right side of the rules. This is the challenge that all small businesses (and large ones) face.
The Basics of Small Business Tax Planning
Small businesses have to worry about several types of tax. These include income tax, corporation tax, business rates, national insurance contributions for employers, Value Added Tax, and capital gains tax.
Minimising your spend means having a grasp of how each of these kinds of tax are calculated. In some cases, you might be able to reduce your tax bill by simply changing the structure of your business. Limited companies, for example, pay corporation tax; sole traders pay income tax. Business rates apply to your premises – so you might deal with these by moving an office, or by downsizing and encouraging people to work from home.
National insurance contributions are a tax on workers. If you have fewer workers on your payroll, then you’ll have a lower national insurance bill to pay.
Utilizing Tax Credits and Deductions Effectively
There are a number of ways that certain kinds of businesses can reduce their tax bill through tax credits. For example, if your business is involved in research and development, then R&D tax credits might be useful. Equally, there are many deductions available to green technology businesses.
When you’re taking advantage of these schemes, it’s vital that you can demonstrate that you’re doing the things that qualify you for the relief. Your records, in other words, will need to be highly transparent and well-ordered.
Common Tax Mistakes to Avoid
Many businesses run into trouble with taxation by making a handful of common mistakes. You might submit your return late, or record your deductions inaccurately. You might fail to plan for your tax bill, which might leave you with a damaging cash flow problem.
Generally speaking, it’s a good idea to prepare your return in April, rather than the following January when the money is due. This will give you plenty of time to set aside the funds.
Why Partner with a Tax Expert for Your Business Needs
Tax can be a complex and highly specialised subject. By collaborating with a tax expert, you’ll be able to focus on your core competencies. Tax consultants might also be able to point you toward strategies that you might not be aware of, even if you set aside considerable time for your tax bill. This could save you huge amounts over months and years, while ensuring that you remain compliant.
