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Claim your expenses

Expenses that are “wholly and exclusively” for the purposes of running your business can be deducted from taxable profits to reduce your tax payments. This applies for both sole traders and limited companies.

Examples of allowable expenses include:

  • office costs such as stationery and phone bills
  • bills for business premises like business rates and energy
  • advertising and marketing costs such as website fees
  • business travel costs such as fuel, parking charges and bus, plane or train tickets
  • insurance and bank charges

If you work from home, you may be able claim a portion of your household bills as a business expense.

If you are self-employed, you can calculate how much either by using HM Revenue & Customs flat rate or by working out the exact amount you have used. You can work out the latter based on the total household bills, the rooms you’ve used and the duration you’ve used them for business purposes.

Limited company directors who work from home may be able to arrange for their company to reimburse them £6 per week or they may be able to charge the company a rent for the use of the home.

More details may be found here.

Please note that the actual processes for work from home expenses differ for sole traders and limited companies so speak to your accountant for advice.

Pay into your pension

Both sole traders and limited company directors can get tax relief by paying into a pension.

By making personal pension contributions, you automatically get basic rate tax relief. Higher rate taxpayers can claim additional relief via their self-assessment tax return.

A limit applies to the amount of tax efficient savings which may be made which is known as the annual allowance and currently this sits at £60,000. As part of his Budget on 15th March, Chancellor Jeremy Hunt announced significant changes to the amounts individuals may save into their pensions and more details of the changes may be read here.

Limited company directors can sometimes obtain tax benefits by making contributions from the company rather than as personal pension contributions.

By doing this, the company contributions will generally be an allowable company expense and reduce corporation tax payments.

In addition, contributions can be made into a pension plan before any tax is deducted from income which means the limited company director will pay less income tax on the forgone dividend or salary.

You may also need to take pensions and investment advice from an independent financial adviser. We work with TaxAssist Financial Services who can advise you on all aspects of your financial affairs, including independent advice on pensions and retirement planning. 

Make charitable donations

Some taxpayers can claim tax relief on charity donations they make using Gift Aid. The relief works in a similar way to making personal pension contributions.

If a donation is made this way, the charity can reclaim the 20% basic rate of tax, and a higher or additional rate taxpayer who has made the donation can obtain additional tax relief on their tax return.

You must ensure you have paid sufficient tax for the charity to make the gift aid claim to avoid an unintended tax bill.

Claim the Employment Allowance

If you are an employer and you fit the eligibility criteria, you can claim Employment Allowance to reduce your annual National Insurance liability by up to £5,000.

You can claim the allowance if you are a business or charity, and your employer’s Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.

There are some employers who can’t apply, including if you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold and the employee is also a director of the company.

Full HMRC guide for the Employment Allowance is here.

Join the VAT Flat Rate Scheme

It will not be appropriate for all businesses, but you might be able to reduce your tax bill by joining the Government’s VAT Flat Rate Scheme.

To join, you need to be a VAT-registered business and expect your VAT taxable turnover to be £150,000 or less (excluding VAT) over the next 12 months.

Being part of the scheme means you pay a fixed rate of VAT to HMRC which varies depending on your type of business. You then keep the difference between what you charge to customers and pay to HMRC. 

If it’s your first year as a VAT-registered business, you also get a 1% discount.

Disadvantages of the VAT Flat Rate Scheme include that you can’t reclaim VAT on most purchases.

To help you decide if the scheme is right for you and your business, speak to your accountant.

Claim research and development tax credits

Research and development (R&D) tax credits is a government incentive that rewards UK businesses investing in innovative science and technology projects. An improvement to an existing product or process may be sufficient for a claim for tax credits.

You should speak with your accountant as this is a specialist area. Your accountant will be able to submit your claim and ensure the value of your claim is maximised. This also ensures it can be robustly backed up should HMRC challenge it.

Use of losses

As outlined by this article about tax efficiencies, it was previously common for companies suffering trading losses to carry it back to a previous year and generate a tax refund at 19%. However, to reduce their tax bill, a company may be better off to carry forward the loss and obtain a tax refund as high as 26.5%. 

Balancing the cash flow advantage of a refund at 19% with the potential to obtain a higher refund at a later date is an important factor that it is well worth considering and discussing with your accountant.

Don’t miss tax deadlines

There are several deadlines you need to meet for submitting tax-related documents. Examples are the 31st January cut off for submitting your self-assessment tax return online and 31st July for paying your second annual payment on account.

Miss those deadlines and your tax bill could quickly increase due to fees and penalties.

You should keep track of the various deadlines and submit tax returns and payments on time. Meeting tax deadlines early can have many benefits.

Get advice on tax planning from TaxAssist Accountants

Whether you have just started your business or you have been running it for a long time, TaxAssist Accountants can help with your tax planning needs.

Call us on 0800 0523 555 or fill in our online enquiry form.

Date published 1 Aug 2023 | Last updated 20 Mar 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Dan Martin

Dan is a freelance journalist and event host who writes content for TaxAssist Accountants. With 20 years of experience, he has interviewed hundreds of entrepreneurs from famous names like Sir Richard Branson and Deborah Meaden to the founders behind the newest start-ups. Dan was previously Head of Content at small business membership organisation Enterprise Nation.

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