Whether you’re an entrepreneur or small-business owner who’s self-employed, or an employee of a company with a lot of employees, it’s important to understand that taxes can sometimes seem like they take up more than their fair share of your hard-earned money. There are a number of strategies you can use to relieve the weight of taxes in your business, though, and today we’re going to explore a few of them.
1. Make Use of Deductions
The first, and perhaps most obvious, way to reduce the amount of taxes you owe is to take advantage of any and all deductions that you qualify for. This could include capital allowance claims, which are available for businesses that invest in new plant and machinery. There are also a number of expenses that can be deducted from your taxes, such as travel and entertainment expenses. Be sure to explore all the deductions that may apply to your business to ensure that you’re not paying more tax than you need to.
2. Use Tax-Advantaged Accounts
Another way to reduce the amount of taxes you pay is to take advantage of tax-advantaged accounts, such as a pension or an Individual Savings Account (ISA). These accounts allow you to save money for retirement or other purposes while benefiting from tax relief. This means that you can effectively reduce your taxable income, and as a result, the amount of taxes you owe.
3. Claim Capital Gains Tax Relief
If you’re a business owner who’s looking to sell your business, you may be able to claim Capital Gains Tax relief. This relief can help to reduce the amount of taxes you owe on the sale of your business and increase the amount of money you take home. When claiming this relief, it’s important to be aware of the rules and deadlines, so be sure to speak to an accountant or tax advisor before proceeding.
4. Consider Incorporation
If you’re a sole trader or small business owner, you may want to consider incorporating your business. Incorporating your business means that you’ll be liable for Corporation Tax, rather than Income Tax. This could potentially save you a significant amount of money in taxes, so it’s definitely worth considering if you’re looking to reduce the amount of taxes you owe.
5. Review Your Tax Code
As an employer, it is your responsibility to ensure that your employees’ tax codes are up to date and accurate. If you have any employees who are on an outdated or incorrect tax code, it could result in them paying too much tax. As a result, you may be able to reclaim overpaid taxes from HMRC. This is something that’s definitely worth doing if you want to reduce the amount of taxes you owe.
6. Make Use of Tax-Free Investments
Tax-free investments, such as Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs), can be a great way to reduce the amount of taxes you owe. These investments allow you to invest in small businesses and receive tax relief on the money you invest. Different rules and regulations apply to these investments, so be sure to speak to an accountant or tax advisor before proceeding.
7. Use Offshore Tax Havens
Offshore tax havens, such as the Isle of Man and the Channel Islands, can be a great way to reduce your tax bill. These jurisdictions offer lower tax rates than the UK, which means that you can effectively reduce the amount of taxes you owe. However, when using offshore tax havens, it’s important to be aware of the rules and regulations, as there can be significant penalties for non-compliance.
8. Claim Research and Development Tax Credits
If your business is involved in research and development, you may be eligible for Research and Development (R&D) Tax Credits. These credits can help to reduce the amount of taxes you owe and are available to businesses of all sizes. To claim these credits, you’ll need to submit a detailed report to HMRC outlining your eligible R&D activities.
9. Delay Payment of Taxes
If you’re finding it difficult to pay your taxes on time, you may be able to delay the payment by making use of the Time To Pay service. This service allows you to spread the cost of your tax bill over a period of time, which can make it more manageable. However, there are strict eligibility criteria for this service, so be sure to speak to an accountant or tax advisor before proceeding.
Taxes can be a tough pill to swallow, especially for small business owners who have less money in the first place. However, by taking advantage of deductions, tax reliefs, and other opportunities, you can effectively reduce the amount of taxes you owe. This will free up more money for you to reinvest in your business and help it to grow. Speak to an accountant or tax advisor to find out more about how you can reduce the amount of taxes you owe.