6 ways your business can become more tax efficient

Tax savings shown by Piggy Bank and 2021 number on wood block on top of stack of coins

TaxAssist Accountants in Weston-super-Mare can offer financial advice to help your business make significant tax savings - Credit: Getty Images/iStockphoto

Whether you’re a new business owner or you’ve been operating for a while, seeking advice from a tax specialist can help you to plan for the future and make significant savings.  

As a responsible business, it’s important to keep on top of your tax affairs and stay on the right side of the law, but that’s not to say you should be overpaying. Luckily, there are a few simple ways you can avoid paying more than you need to, from effective bookkeeping to taking advantage of government schemes.  

Closeup woman filling form of Individual Income Tax Return,

Staying on top of your tax affairs with good bookkeeping can help you to plan ahead and save money - Credit: Getty Images/iStockphoto

John Mayer from TaxAssist Accountants in Weston-super-Mare shares six ways you can make your business more tax efficient and ensure long-term success.  

1. Take advantage of the super-deduction tax relief 

Super-deduction tax breaks were announced in April’s 2021 budget, which means companies can now claim a super-deduction of 130 per cent on most new plant and machinery investments that ordinarily qualify for 18 per cent main rate writing down allowances.

The super-deduction offers first-year relief on capital investments until March 31, 2023, allowing companies to save an effective reduction in tax of 24.7p for every £1 spent. 

2. Utilise pensions  

If you run a limited company, pension contributions can provide significant tax benefits. Employer contributions are considered a legitimate business expense, which means they can generally be offset against your business’s corporation tax.

Most Read

However, this process can be complex, which is why it’s advisable to seek specialist financial advice before making contributions to an employee pension scheme.  

3. Use research and development (R&D) grants 

Scientific covid-19 virus antibody sample in laboratory research experiment biotech make cultivate v

If your company seeks to achieve an advance in science or technology, you may be eligible for R&D tax credits - Credit: Getty Images/iStockphoto

If your company has been engaged in a project that seeks to achieve an advance in science or technology, it is carrying out research and development and this means you may be eligible for the government-approved R&D tax credits. This allows you to deduct an extra 130 per cent of your taxable profits, as well as the normal 100 per cent deduction.

If your company doesn’t make any profit, you can claim a repayable tax credit calculated at 14.5 per cent. 

4. Plan for the tax rise 

In April 2023, the rate of corporation tax will increase to 25 per cent – a six per cent increase from the current 19 per cent. SMEs (small to medium enterprises) with less than £50,000 profit will continue to pay corporation tax at the current 19 per cent rate, although this number will go up for businesses nearing the £250,000 profit margin.

A tax accountant can provide tax planning advice that may benefit you and your company. 

5. Claim allowable expenses 

It might sound obvious, but failing to claim all allowable expenses is essentially throwing money down the drain. Not only are you missing out on tax relief from the claim, but you will also be paying more on your corporation tax bill for the expense. Keep a record of everything you purchase to avoid any mistakes when claiming – this can include office equipment, business travel expenses, and even the cost of working from home.

Although it might sound time-consuming making a note of every small claim, over the years it adds up and you could be losing out on significant savings.   

6. Pay HMRC early  

Another simple but effective trick is to pay your corporation tax bill early. If you can afford to settle in advance, HMRC will reward you by repaying some of it back in the form of interest (the current interest rate is 0.5 per cent).

On the other hand, paying your bill late means you will be charged a higher rate of interest than you would receive by making your payments early. 

For professional tax advice for your business, call TaxAssist Accountants on 0800 144 8372 or visit taxassist.co.uk.