In the 2021/22 tax year, the UK Government collected almost 39% of national GDP from taxation. These are levels that have not been seen for almost 40 years in Britain. Then, in the final 2 quarters of 2022, the UK Economy has been rocked.
First, the now infamous ‘mini-budget’ of previous Chancellor Kwasi Kwarteng absolutely obliterated market confidence in UK Markets. Then, the new Chancellor Jeremy Hunt sought to rebuild this trust by introducing a range of spending cuts but most crucially new tax rises.
These tax hikes will result in the UK having some of its highest tax rates since the end of the Second World War. What this means for small businesses and their owners, is that if they are not efficient with their accounting, they could be hit with much larger bills for Corporation Tax, Income Tax, and VAT.
So what can small business owners do to ensure they are as tax-efficient as possible? There are many different ways to manage a business’s finance, depending on how they operate, to ensure that tax bills are kept as low as legally possible.
Small business owners have several avenues to enhance tax efficiency. Tailoring financial management strategies to the specific operations of the business is key to minimizing tax liabilities within legal boundaries. One critical aspect is thorough tax planning, which involves strategic decisions regarding deductions, credits, and expenditures. In addition, for businesses in Arizona, meticulous attention to Arizona sales tax filing is crucial. This process involves accurately reporting and remitting sales taxes to the state’s revenue department. Accurate filing is not only a legal obligation but also ensures financial stability and reputation for businesses operating in Arizona. Staying up-to-date with the latest tax regulations and seeking professional guidance can further streamline the filing process and enhance overall tax efficiency.
In this article, we’re going to highlight 4 of the most crucial tax-saving pieces of advice for small businesses, sole traders, and partnerships in the current UK economy.
- Know What Self-Employed Expenses You Can Claim For
Not many self-employed people or small businesses are aware of the costs that might be written off from their taxable income. There are many different expenditures that may be deducted, and the types of businesses themselves have significantly different expenses.
Depending on whether the business deals with handling materials that need to be procured or they have premises that require rent, insurance, and maintenance. Below is an overview of the different kinds of things that can be claimed against taxable income for the business.
- Office Expenses (Phones, Stationery, Software, etc.)
- Premises Expenses (Rent, Maintenance)
- Travel Expenses
- Stock/Materials
- Legal & Accountancy Costs
- Business Insurance Costs
- Uniform or PPE Clothing
- Staff Costs (Wages, Bonuses, Benefits etc)
- Know How To Minimise Tax On Your Savings
There are probably tax breaks and exemptions you may take advantage of, whether you’re investing for retirement, saving for a rainy day, or everything in between. There can be certain dangers to watch out for as well. This is where professional business tax services can help.
There is a Personal Savings Allowance that allows you to accrue a certain amount of interest on your savings without paying tax on it. The Personal Savings Allowance varies depending on the Income Tax Band your income is in. See our breakdown of how the Personal Savings Allowance changes across the different tax brackets below:
- Basic rate taxpayer – £1,000
- Higher rate taxpayer – £500
- Additional rate taxpayer – £0.
As well as this there is also an ISA Allowance which allows people to make deposits of up to £20,000 per year into their personal ISA without being taxed on these savings. This money can also be contributed to stocks and a shared ISA too.
Savings interest from your bank or building society is often paid “gross,” even though it is usually taxed, like any other income you get. Savings interest that exceeds your Personal Savings Allowance or Starting Rate for Savings is also subject to taxation. The tax you pay determines your overall income for that tax year.
- Hire An Experienced and Qualified Accountant
Only accountants went into business so that they could be accountants. Most small businesses and sole traders do not want to be spending their time on bookkeeping and preparing annual returns. They want to pursue their passion and make themselves the life they dreamt of.
Therefore, hiring a qualified and trusted accountant is going to be the most beneficial way to not only free up your time but to also minimize your tax commitments. Small businesses, sole traders, partnerships, and limited corporations may really start to feel the value of having a certified expert minding their money by outsourcing their tax filing to an accountant. Not just in terms of taxation, but also through guidance on commercial development decisions.
- Don’t Miss Submission Deadlines Which Lead to HMRC Penalties
Ensure your yearly accounts, tax returns, and Companies House documents (confirmation statement) are submitted appropriately and on schedule if you work via your limited business to avoid fines. HMRC will often not only fine those who file late, but it also can increase your likelihood of being subject to a tax investigation.
You must file your self-assessment return and pay any taxes due by the 31st of January each year whether you operate as a sole trader or a partnership. You must also file a personal tax return if you are a corporate director or have untaxed income. If you are late filing your self-assessment tax return to HMRC, you can expect a minimum penalty fine of £100, this can be even higher should you file more than 3 months late.
Remember that even if you have the greatest accountant in the country, it is ultimately the owner’s responsibility to ensure that their accounting is accurate and timely. Many businesses that have had great ideas and people within them have failed due to poor financial management especially when it comes to filing your tax returns on time.
Now You Can Start To Save Money On Your Tax Commitments In 2023
With the UK’s current economic situation looking bleak for small businesses up and down the country, it really is important that you stay on top of your tax commitments and work to ensure these bills are as low as legally possible.
By following these pieces of advice above, you can begin to save money on your tax bills each year no matter if you are a small limited company, a partnership or a sole trader.