Running a business, or working for yourself, can be exceptionally rewarding, but it is also very challenging at times, especially when the economy is in turmoil. It is therefore well worth exploring all the ways in which you can reduce your financial burden. With this in mind, let’s take a look at seven top ways in which you can benefit from the available tax relief for small businesses and the self-employed.
1. Employment Allowance
Eligible employers are entitled to National Insurance (NI) relief via the Employment Allowance. This tax relief for businesses allows a reduction of the NI liability by up to £4,000 per tax year. Employers’ Class 1 National Insurance payments reduce each time the payroll is run, until the £4,000 has been utilised, or the tax year has ended.
2. Annual Investment Allowance
The Annual Investment Allowance (AIA) is a tax relief for self-employed and small business owners. It can be claimed on most owned plant and machinery used within a business, up to the AIA amount. In most cases, the full cost of these items can be deducted from your profits before tax.
Claims should be made on your Self-Assessment tax return, your partnership tax return, or your Company Tax Return.
3. Small Business Rate Relief
In light of the coronavirus pandemic, the government has paused demands for business rates for 2020-2021 for retail, leisure, hospitality and nursery businesses. Small business rate relief is available to businesses whose property’s rateable value is less than £15,000, and for those who only use one property.
To apply for the relief, you should contact your local council.
4. Research and Development Tax Relief
If your business is working on an innovative science and technology project, then you may be able to claim Research and Development (R&D) tax relief. To claim the relief, it is necessary to explain how your project explored a scientific or technological advance; that you had to overcome uncertainty and tried to overcome it, and how it could not easily be worked out by a professional in the field.
There are two types of R&D tax relief. SME R&D relief is for businesses with less than 500 staff and a turnover of under €100 million or balance sheet total under €86 million. This allows you to deduct an additional 130 per cent of your qualifying costs from your annual profit, as well as the regular 100 per cent deduction. You can also claim a tax credit if your company is making a loss, worth up to 14.5 per cent of the surrenderable loss.
Research and Development Expenditure Credit (RDEC) is for larger businesses, or can be claimed by SMEs who are subcontracted to undertake R&D work for a large company. This is a tax credit, and is currently 13 per cent.
As this tax relief for businesses is claimed through Corporation Tax, you will need to be a limited company to qualify.
5. Creative Industry Tax Reliefs
Creative Industry tax reliefs are a group of eight Corporation Tax reliefs. They make it possible for eligible companies to increase their allowable expenditure, which can in turn reduce the amount of Corporation Tax payable. For companies making a loss, that loss can potentially be surrendered and converted in whole or in part into a payable tax credit.
If your business is directly involved in the development and production of films; high-end, children’s or animated television; video games; theatrical productions; orchestral concerts or museum or gallery exhibitions, then it may be entitled to claim, providing you meet the criteria, which includes all films, animation, television programmes or video games being certified British and passing a cultural test.
6. Business Asset Disposal Relief
Formerly known as Entrepreneurs’ Relief, Business Asset Disposal Relief reduces the amount of Capital Gains Tax you pay when you sell all or part of your business. The relief means you will pay tax at 10 per cent on all gains on qualifying assets.
Claims can be made either on your Self-Assessment tax return, or by completing the government’s Business Asset Disposal Relief help sheet.
7. Tax-Deductible Expenses
There are a number of expenses that can be offset to provide tax relief for businesses and tax relief for self-employed individuals. These include vehicle running costs, use of home as office, childcare costs, pension contributions and more. There is a full list of allowable self-employed expenses here, and business related expenses here.
Looking for business or self-employed tax relief advice?
It is important to take advice from an independent tax adviser who has the knowledge to view the bigger picture when looking at claiming tax relief. The adviser can consult with your accountant to ensure all bases are covered and you are making the most of the opportunities that are open to you.
Here at Partridge Muir & Warren, we have an in-house team of tax advisers, financial planners and legal specialists ready to provide you with the advice you need to reduce your costs and maximise your income as a small business or self-employed individual.
To learn more about how we can assist you, please get in touch.