Running a small business can be a daunting task, especially when it comes to managing finances and taxes. As a small business owner, you are constantly looking for ways to save money and maximize profits. Fortunately, there are several tax breaks available that can help you do just that. In this article, we will discuss six tax breaks that every small business in the UK should know about.
1. Small Business Rate Relief
One of the biggest expenses for small businesses is business rates, which are taxes paid on non-domestic properties. However, if your business has a rateable value of less than £15,000, you may be eligible for Small Business Rate Relief (SBRR). This relief can reduce your business rates by up to 100%, depending on the value of your property. If your rateable value is between £12,000 and £15,000, you may still be eligible for a partial relief. This can be a significant cost-saving for small businesses, so make sure to check if you qualify for SBRR.
2. Research and Development Tax Relief
Innovation is the key to success for many small businesses. If your business is involved in research and development (R&D), you may be eligible for tax relief. The R&D tax relief scheme allows businesses to claim back a percentage of their R&D costs, including staff salaries, materials, and software. Depending on the size of your business, you could receive up to 33% of your R&D costs back as a tax credit. This can provide a much-needed boost for small businesses looking to invest in new products or services.
3. Annual Investment Allowance
The Annual Investment Allowance (AIA) is a tax relief that allows businesses to deduct the full cost of qualifying assets from their profits before tax. Qualifying assets include equipment, machinery, and certain types of vehicles. The AIA has recently been increased to £1 million, meaning that businesses can now claim tax relief on up to £1 million of qualifying assets in a single tax year. This can be a huge benefit for small businesses looking to make significant investments in their operations.
4. Capital Allowances
In addition to the AIA, businesses can also claim capital allowances on certain assets that are not covered by the AIA. This includes items such as buildings, fixtures, and fittings. Capital allowances allow businesses to deduct a percentage of the cost of these assets from their profits before tax. The rate of allowance varies depending on the type of asset, but it can be as high as 100% for certain energy-efficient equipment. Make sure to keep track of your capital allowances to maximize your tax savings.
5. Employment Allowance
If you have employees, you may be eligible for the Employment Allowance. This allows businesses to reduce their National Insurance contributions by up to £4,000 per year. To qualify, your business must have paid Class 1 National Insurance contributions of £100,000 or less in the previous tax year. This can be a significant saving for small businesses, especially those with a large number of employees.
6. Seed Enterprise Investment Scheme
For small businesses that are just starting out, the Seed Enterprise Investment Scheme (SEIS) can provide valuable tax relief. This scheme allows investors to claim income tax relief of up to 50% on investments made in qualifying small businesses. This can be a great way for small businesses to attract much-needed funding and for investors to benefit from tax savings.
In conclusion, as a small business owner in the UK, it is important to be aware of the various tax breaks available to you. These tax breaks can help you save money, invest in your business, and ultimately, grow your profits. Make sure to consult with a tax professional to see which tax breaks you may be eligible for and start taking advantage of them today. With these tax breaks in your arsenal, you can be on your way to building a successful and thriving small business.