Tax for small businesses isn’t as straightforward as you would think.. It’s quite daunting and stressful too. If you’re trying to grow your business and juggle the struggles of running a business too like dealing with tax then you’ll probably be pretty stressed out!
As a business owner you might think you can pass all your tax related issues off to your accountant but ultimately it is the director who is responsible for having a company tax affairs in order.
However with that being said.. your accountant should be able to advise you on all areas and being able to save money when it comes to tax should be one of them. If you’ve not setup your business yet you need to consider what would work best for you. Is being a sole trader or limited company better? What business structure works out best for you.
Are you doing everything to save tax? Heres some tips.
- Keep your accounts separate – Don’t use your personal bank account. Keep everything separate from the get go. Get a business checking and savings account!
- Know your industry – most industries have different allowances that are approved by the HMRC such as uniform allowances.
- Spend more time on your business – as a business owner or startup director you’re going to be wearing a lot of different hats. Will your business benefit from you spending time keeping books? or will you be better working on the business? Think about getting a good accountant and you can spend more time on growing your business.
- Know your VAT! – VAT is where most businesses lose out! not everyone pays the right amount. Loads of businesses are unaware of the Flat Rate VAT scheme and most businesses are losing out because of it. For the right type of business this can be a massive source of unexpected profit! Check out HMRC and look at their list of flat VAT rates for different industries. You can also have a look at Tax Kings as they can provide you with a lot of advice on this matter.
- Talk to your accountant! – Think of your accountants as your trusted advisor. If you don’t talk to your accountant – change your accountant. Heres five areas you should discuss with your accountant – Cash flow, theft protection, financing, taxes and inventory. Talking with your accountant can help you take advantage of new law opportunities that you could reek benefits from. You can avoid missteps that could “red flag” returns for audit. You don’t want to draw any attention. Taxes involve a considerable amount of planning, its not just about reporting your income and claiming deductions. Your accountant can help you understand the implications of hiring an employee vs getting contractors.
- Work from home! – Did you know you can save tax from self employed businesses that spend loads of time in the house? If you do work from home and want to claim tax you should have your own office that must be available to be inspected. The cost should represent the office paying a proportion of heating, lighting, internet and the property bills. So for example a room in a 4 bedroom house you could charge 1/4 of your costs.
- Travel, Subsistence and PIEs – costs that you incur from travelling to the office or on a business related journey are tax deductible. So if you’re heading to see a client, training event or on a trip to buying to new equipment you can get the costs reimbursed by the company. So Airplanes, Bus, Train tickets, Taxi fares, parking, hotels and meals or even mileage on your own car can all be reimbursed.
- Telephone expenses – You can claim the costs of business calls. Unfortunately you can’t claim the cost of the rental though.
- Equipment Purchases – The cost of equipment purchased can be reimbursed. So buying desks, chairs, bookcases, computers and you can even get software reimbursed.
- Organise Financial Records Monthly – Document details and organise all your receipts. It might be worth scanning all receipts for the expenses you plan on claiming. Keeping a spreadsheet will be good too. There are numerous apps out there to help you track your business mileage etc.
- Depreciation – You can claim the depreciation on the wear and tear of business items over time. So if you owned a fleet of company cars for example you’ll be able to claim tax back. Furniture, machinery and even intangible property like patents, copyrights and software is depreciable too.
Theres loads of ways to claim tax back as a small business owner. If you’re looking for an accountant that can help you with your tax check out Tax Kings for advice.