6 Small Business Tax Breaks You Might Not Know About
Category : Blogs
It’s April, and you know what that means? It’s the end of the tax year! That means that most of you will also have your company end of year coming up as well – since this is the most common time to set it up for. After all, you’re already filling in a bunch of forms (or your accountant is), so adding a few more won’t be too much of a burden. But did you know that there are a number of tax breaks that are available to small businesses like you, that you might not even know about? Well, we’ve collected 6 here for you.
R&D Tax Credits
Even if you don’t feel like your business qualified for this tax break, it’s definitely worth looking into. Research and Development (or R&D) tax credits are a valuable government tax relief that rewards UK companies for investing in innovation. Even if your business is running at a loss, you may still be entitled. And because the definition used by HMRC to define innovation is so broad, you don’t need to be in a laboratory kitted out in your lab coat to qualify. If you’re not sure, ask your friendly neighbourhood accountant to check for you.
Annual Investment Allowance
It’s always a good idea to try and make use of your Annual Investment Allowance (or AIA). This will help you claim 100% tax relief on any assets that qualify as machinery and plant in the first year of purchase. However, the criteria for the assets that qualify is quite strict, so you’ll want to check the list before you go spending the money. For example, company cars aren’t on the list. You also need to physically own the assets to qualify – you can’t have them on a lease.
The Seed Investment Scheme
There are a huge number of Government investment schemes you could utilise in your business. The one we recommend is the Seed Investment Scheme (SES). Any business just starting out and looking for additional capital (but doesn’t want to go to a bank) can use this scheme to gain the capital they need. There are also very generous tax breaks given to potential investors in the scheme. So if you’re in your first year of business, it’s a great source of working capital, and if you’re more seasoned, it’s an amazing way to support the local business community – and reduce your tax bill at the same time.
Enhanced Capital Allowance
The government, in a bid to promote the use of energy-saving equipment, introduced the Enhanced Capital Allowance (or ECA – they do love their acronyms) to give tax breaks to businesses who made a significant effort to be green. So if you use a car that has low CO2 emissions, water-saving equipment or other products that save energy in your business, then you can take advantage of this nice tax break. This break was formed when the government was in a coalition, and can sometimes be difficult to grasp the details of. So if you aren’t sure, just speak to your accountant.
Business Renovation Allowance
If the building your business is planning to use has been empty for more than a year and was previously used in a different capacity, this one’s for you. If you meet the criteria, you are entitled to a 100% tax incentive on any renovations you may carry out on the premises. This is a great option if you’re looking to bring on old warehouse or shop back to life. It doesn’t apply to office space though, sadly.
Finally, you can also reduce your NICs with the Employment Allowance. If you employ people, the employment Allowance reduces the amount of National Insurance you have to pay each year by up to £3000. That’s not an insignificant chunk of change. It works by you ‘claiming’ your allowance each month via your businesses’ payroll process as the NIC arise. This basically means that you won’t need to pay NIC until the full £3000 has been used. In some cases, particularly for small businesses, you can completely eliminate your NIC bill as a result. Small foot note though – if your company only have one employee/director, you can’t claim this benefit.
Of course, there are many other benefits, schemes and other ways you can more effectively manage your businesses tax affairs. We’re not accountants – we can’t tell you all of them. But what we can do is encourage you to think about how you could manage this year’s taxes a little differently, and maybe even do some good to the community and your business at the same time. For more information, come along to a meeting and chat to one of our trusted accountants.