Tax issues for small business owners can be a cause of considerable worry – the area can seem obscure and hard to understand. But while it’s true that there is the potential for pitfalls for those who don’t know what they’re doing (and of course for those who try to get around the system), it’s an area that can, with a little work, reap big benefits for those who are willing to invest the time. Our first tip of course would be to be as well-informed as possible – and engaging the services of a qualified accountant is highly recommended. Beyond that, here are a number of things to think about in terms of reducing your tax bill.
1. Do your research.
Understanding the particular industry you’re in is absolutely vital – with a little bit of research you may well find that there are a number of special dispensations and allowances offered by HMRC that can help you to save. Ask your business network how they operate, and make sure that you’re taking advantage of everything that is available to you.
2. Work with your accountant.
If they’re good, then they will be well worth every penny you pay them. And if you don’t feel that you’re getting the help and support you need, then change accountants – they should be someone who you trust completely and who has your interests as their number one priority. Work with them and you should hopefully see a big benefit in terms of lower tax payments – they’ll know what you can claim on and make sure you’re not missing out. Hiring a good accountant will also allow you to focus on the important things – concentrating on growing and developing your business.
3. Don’t lose out on VAT
There’s a good chance that you can actually make a profit on VAT. The Flat Rate VAT scheme offered by HMRC is a single, flat rate of VAT on your turnover. The rates are different for different industries (just ask your accountant), but you may well be able to apply the percentage to your gross turnover in the quarter and pay this to HMRC.
While you can’t usually reclaim the VAT on the things you purchase, you can keep the difference between the 20% VAT you charge your customers – and you can even get a further 1% discount from HMRC for the first 12 months you’re registered. It’s well worth investigating.
4. Make the most of working from home
Avoiding tiresome office politics isn’t the only benefit of using your home as an office. While most small business owners know that HMRC can give you generous tax savings as a self-employed person who spends time working from home, there’s good chance that you could actually be saving even more. Self-employed business owners can save on everything from council tax, your mortgage interest and insurance through to utility bills, your phone costs and even general household repairs. And if you use a dedicated room in the house for your business then make sure you take full advantage of the Use of Home claim.
5. Don’t miss out on staff benefits
There are a number of benefits you can offer your staff (or even take advantage of yourself if you’re a sole trader). The cycle to work scheme is a fantastic way to help keep you (or your staff) healthy, with savings of up to 25% of the cost of a new bike and equipment. Take advantage of it – you’ll be surprised at the benefits it can offer. And if you or your staff have kids, then it’s also well worth using the tax free childcare voucher scheme – again, you can save on tax and help you or your staff out with the costs of care.
