Maximise Your Tax Deductions as a Business Owner
As a small business owner, tax season can be daunting. The good news is that numerous deductions are available to help reduce your taxable income and save you money. But with the ever-changing tax laws, it’s becoming increasingly difficult to navigate the complexities of filing your taxes without professional help from a financial advisor in Swindon or a tax return accountant. Having someone knowledgeable on your side can make all the difference in maximising your tax deductions and ensuring you’re taking full advantage of all available deductions.
What Is Taxable Income?
Taxable income refers to the income that is subject to tax by the government. This includes earnings from employment, self-employment, rental income, and any other sources of income. However, not all types of income are taxable. For example, some benefits, such as child benefits and personal independence payments, are not included in taxable income.
How to Reduce a Small Business’s Taxable Income?
Small businesses can reduce their taxable income by taking advantage of tax deductions. They can deduct a wide range of expenses. By keeping track of these expenses throughout the year and deducting them from their taxable income, small business owners can lower their taxable income and ultimately pay less in taxes.
Small businesses should also consider consulting with a tax professional to ensure they take advantage of all available deductions and credits. Tax laws are complex, so small business owners must stay informed and seek business startup advice when necessary to minimise their taxable income and maximise profits.
Common Tax Deductions for Small Business Owners
Home office
One of the most significant advantages of working from home is the ability to deduct certain expenses from your taxes. Small business owners can deduct any expenses that are necessary for running their business. This includes things like office supplies, internet bills, and even part of your rent or mortgage payment.
To ensure you take full advantage of these tax deductions while avoiding potential tax problems, consider consulting with tax advisors who specialise in small business taxes. They can help ensure you’re properly tracking and reporting all deductible expenses so that you don’t miss out on any savings come tax time.
Telephone
Telephone expenses include the cost of landline and mobile phone bills that are used solely for business purposes. If you use your phone for both personal and business use, only the portion used for business purposes is deductible.
Car
Business partners and sole traders may be entitled to claim a proportion of their car’s running costs, such as fuel, insurance, road tax, and repairs. Unfortunately, regular home-to-work travel isn’t considered business use.
A capital allowance can also be claimed on a car on top of all the running costs. A new vehicle is eligible for a whole year’s allowance in the year of purchase, even if you purchase it at the end of your accounting period. You’ll also receive a balancing allowance when you sell your old car. However, note that just like your running costs, capital allowance must be limited to business use.
Marketing, advertising, and PR
Marketing, advertising, and PR expenses can add up quickly, but fortunately, they are typically tax-deductible on your annual tax return. Marketing expenses that may be deductible include the cost of creating and printing promotional materials such as business cards, flyers, and brochures. Also included could be the expense of running social media ads or pay-per-click campaigns online.
Advertising costs can also be deducted. This includes expenses related to print ads in newspapers or magazines, television commercials, radio spots, or even billboards. Public relations expenses, such as fees paid to a PR agency or the cost of hiring a freelance writer for press releases, could also qualify for a deduction.
Plant and machinery
Plant and machinery refer to the equipment that a business uses in its operations. This can include anything from office furniture to large manufacturing machines. Small business owners can claim tax deductions on plant and machinery expenses through the Annual Investment Allowance (AIA). The AIA allows businesses to deduct 100% of qualifying plant and machinery costs from their taxable profits up to a certain limit.
Taking advantage of the AIA can provide significant cost savings for small businesses. It’s essential to work with qualified accountants for small businesses when filing taxes to ensure all deductions are correctly claimed.
Travel
This includes transportation costs incurred while conducting business, such as airfare, train tickets, and car rentals. Hotel accommodations and meal expenses can also be claimed as deductions.
Keep accurate records of all travel expenses and receipts. HMRC may request proof of expenditure during an audit, so having organised documentation will save time and stress.
Education and training
If you attend conferences, seminars, or other training events to improve your knowledge and skills as a business owner, those expenses may be eligible for a tax deduction. Furthermore, if you hire employees and provide them with additional training opportunities, such as courses or certifications related to their job responsibilities, those expenses are deductible as well. Educational materials, such as books and subscriptions to industry-specific publications, could also qualify for a tax deduction.
Tips for Maximising Tax Deductions
· Keep track of all expenses: Keep accurate records of all your business expenses, including receipts, invoices, and bank statements.
· Claim capital allowances: Capital allowances allow businesses to deduct the cost of certain assets from their taxable income.
· Take advantage of tax credits: Tax credits can also reduce your taxable income and increase your refund or lower what you owe in taxes. Examples include R&D tax credits for businesses investing in innovation.
· Consult local accountants for small businesses: If you’re unsure which expenses are deductible or how to claim them, consider consulting with a small business accountant. They can provide expert advice and help you navigate the complex world of tax deductions.
Make the Most of Your Tax Deductions with Nigel B Butler’s Expert Help
Looking for a ‘tax advisor near me’ or a ‘personal tax accountant near me’? One way to get expert help with your tax deductions is by turning to Nigel B Butler. With years of experience providing tax services to small businesses in the UK, our team can offer expert advice and guidance to help you maximise your tax deductions. Contact us today!