Tax Deductions and Benefits for Small Businesses

You work hard all year long for the money your business earns. However, every single year, the government wants part of your earnings. The good news is that tax reduction strategies can mitigate your liability. Of course, to achieve those savings, you'll need to know a bit more about the top tax deductions and benefits for small businesses. In this guide, we'll explore corporate tax reduction tips to help.

1. Assets Purchased Before Going into Business

Did you purchase items before beginning your business, but now use them as business tools? If so, you can claim against your profits and reduce your corporation tax burden. What sorts of items, though? Your mobile is a good example, but it could be almost anything else – laptops, licensed software, and more.

2. Your Car

Do you use your car in a business capacity? If so, you can claim a share of maintenance-related costs, insurance costs, road tax, petrol, and even mileage each year on your taxes. With that being said, you must use your car for more than just commuting from home to the office to claim this corporate tax reduction.

In addition to maintenance, insurance, and the like, you can also claim capital allowances here. You are eligible for a full year's allowance on a car in the year it was purchased, even if that purchase was made late in the year. You also qualify for an allowance when selling your old car. That could be an incentive to change vehicles more regularly.

3. Home and Home Office

Do you work from a home office? Even if you have both a home office and a place of business located outside the home, you could be eligible to claim against your profits if the office space in your home is primarily for business use.

In this situation, you have a proportion based on the number of rooms in the home (not counting baths, the kitchen, and the like). For instance, consider James. He works from home every now and then, but uses one of the four rooms in his home as business storage and occasional work space, he could claim 24% of his household bills as business-related expenses.

4. Accounting Help

Do you employ tax reduction consultants, or work with an accountant or bookkeeper strictly for business tax purposes? If so, those costs can be claimed against your revenue. Note that this does not apply if you've employed an accountant because of an enquiry from the HMRC and fraud or negligence is proven in the enquiry.

5. Staff Parties and Events

Chances are good that your small business does not throw lavish affairs several times per year, but there is a good chance that it does have the occasional holiday or staff party. A Christmas party, Easter party, summer gathering – any of these can be claimed as a tax reduction.

6. Work Performed by Family

While we're not saying that you need to hire your distant cousin to handle your marketing, you can (and probably should) claim the pay for any work done by family members on behalf of your business. For instance, does your adult daughter occasionally answer business calls on your home phone? If so, pay her for that work and deduct the expenses. Does your son mow the lawn around your business? If so, that is another deduction.

7. Travel Allowance

Do you travel at all for your business? Whether it's down to London, across to Paris, or somewhere else, your business-related travel is tax-deductible. Now, what many people don't realize is that the government has no say in how you travel, so you can fly economy, or you can fly first class and enjoy yourself. Either way, you can still claim that expense on your business taxes. Note that this doesn't only apply to air travel – it also applies to car hire and other transport needs.

8. Subsistence

You must eat while you're traveling for business. Those costs are also tax-deductible. And, like travel costs, the government has little say in where you're allowed to eat or how much it costs. So, while you can certainly be miserly if you like, you can also make the most of these opportunities and enjoy being a successful business owner while simultaneously enjoying a reduction in your corporate tax rate.

9. Childcare

Let's face it – childcare is expensive. However, as a business owner, it's a necessity. The good news is that there are generous tax relief options related to childcare for business owners today. Note that this extends well beyond care for your own children. For example, if you have a day-care facility at your business for the use of your employees, all the costs are tax-deductible – plus you generate goodwill from your employees.

10. Unpaid Invoices

Every business owner encounters the problem of bad debts at some point. Those unpaid invoices don't have to be an anchor dragging you down, though. After six months, you can legitimately claim them against your income as a tax deduction, turning them from liabilities into assets (or at least offsets).

11. Office Décor

Who wants a drab, boring office? A little bit of colour and flair can go a long way when it comes to making your customers feel comfortable and building a successful brand. Office décor-related expenses are usually deductible from your taxes. Note that some items will require making a business case for their purchase/use, but it is possible to cover many of the associated costs.

Finding the Right Tax Reduction Consultants

As you can see, there are ample opportunities for corporate tax reduction. However, a wrong move could mean an eventual enquiry by the HMRC, which is certainly something you should avoid. At Lawrence Grant, we're dedicated to helping you keep as much of your income as possible. We offer proven strategies to reduce corporation tax. Contact us today to schedule a consultation and to learn more about our services and solutions.

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We are a member firm of the Institute of Chartered Accountants of England & Wales (ICAEW). Registered to carry on audit work in the UK and Ireland. Our Insurer is Prosure Solutions (per W R Berkley , and IGI), 34 Lime St, London EC3M 7AT (worldwide, excluding North America). Also an independent member of GGI, a multidisciplinary worldwide association of accountants, tax consultants & lawyers.