Tax for small businesses can be a minefield if you are not correctly prepared for it. However, if you take some time and work with your accountant, you will find that there are a number of ways that you can save when it comes to taxes. There are many ways that you can save money with taxes and it is important that you consider as many as possible. Of course, not all ideas or methods will work for every business, but most of them will make you stop and think about what you are doing in regards to your taxes.
Know Your Industry
Knowing your industry is important and you should stay engaged with your trade association or body by reading their newsletters and attending any events they host. Most industries have special allowances or dispensations which have been approved by the tax authorities such as a uniform allowance. Your union and trade body will be aware of this and they are on your side so you need to take the time to use them.
Spend More Time On Your Business
A lot of small business owners want to do everything themselves, but you have to consider if you are really the right person to handle your bookkeeping or VAT returns. Your business will benefit from the time that you can spend on it so you should leave your bookkeeper and accountant to do what they do best. Many small business owners do not realize that the money they save on fees will be lost through the lower claims they are making on their taxes.
Know Your VAT
VAT is one of the areas where most business owners are losing out. You need to ensure that you are paying the right amount and that you have looked in the Flat Rate Scheme. A lot of business owners are not aware of the Flat Rate VAT scheme, but this is ideal for many businesses as it can be an unexpected source of profits.
The Flat Rate Scheme allows you to pay a flat rate of VAT on your business turnover. The VAT rate will vary depending on the industry of your business. Estate agents will pay 12% while computer and IT professionals will pay 14.5%. You will need to determine the VAT rate for your industry, apply this to your gross business turnover per quarter and pay this to the tax authority.
It is generally impossible to reclaim VAT on your purchases, however, you will be able to keep the difference between the VAT you pay and what you charge your customers. The tax authority may allow a discount during the first year of your registration for VAT. It is important that you talk to your accountant about the Flat Rate Scheme and other VAT saving options. Check out this piece from VATGlobal to get a good run down.
Talk To Your Accountant
There are a lot of business owners that complain about their accountants and how they have to pay too much in tax. The truth is that many of these business owners do not have the right relationship with their accountant. If you regard your accountant as a trusted advisor and someone who can help you, you will be more likely to pay as little tax as possible. If you feel that you are unable to properly communicate with your accountant, you should consider using a different one.
Work From Home
Self-employed businesses are given generous tax savings when business is conducted from your home. It is important that you are aware of this. You will generally be able to claim a home charge for each week that you work at home. If you are running a sole trader business from your home, there is a more scientific calculation that will need to be used. This calculation will determine which expenses you can deduct for the use of your home.
Some of the costs that you will be able to claim as a self-employed business owner include mortgage interest, home insurance, water, landline and phone costs as well as general household maintenance or repairs. If you have a dedicated room for your business in your home, the Use of Home claim can be quite generous.
Keep It In The Family
The tax-free income allowance changes every year and you need to consider this. When you look at your family situation, you could make use of the personal allowance of family members. Of course, these family members will need to be able to carry out duties within your business for this method to work or be legal.
Treat The Staff
There are a number of tax-free benefits that you can provide to staff which will save you and them tax. There are few small businesses that make use of these benefits, but they all should. A cycle to work scheme can save up to 25% of the costs of the new bicycle and be used as a tax saving. Many large organizations are keen promoters of this scheme because it not only saves tax it will also improve the overall health of your employees.
Tax-free childcare vouchers are another benefit that you should consider. There is also a generous allowance for staff mobile phone bills which can be used in the same way as childcare vouchers. You will deduct payment for these benefits from the employee’s pay slip which reduces the amount of tax they will have to pay.
Keeping copies of everything is a great way to stay organized and ensure that you are claiming everything that you can. This is something you should do if you complete the bookkeeping yourself or not. One of the most common reasons for disallowed expense claims or VAT problems is the failure of the business to have proper records for the tax authorities.