Tax efficient strategies for business owners

Self-assessment tax returns are due this month. The end of the tax year, 5th April, is fast approaching. And for many, your year-ends are just around the corner. Undoubtedly, you will be thinking about how to reduce the amount of tax you have to pay, especially as you are all likely to be facing higher tax payments than in previous years.

In April 2023, the rate of corporation tax increased to 25% for companies with profits over £250,000. The rate remains at 19% for businesses with taxable profits of less than £50,000. For those falling between these brackets, a marginal tax relief will come into play.

Over the next few weeks, we are going to share a number of tax-efficient strategies that will help reduce your tax bill.

Tax tip number one: Claim all your reliefs and deductions

The first step is to make sure you are claiming all reliefs and deductions available to your business. There are a number of reliefs and deductions, but as always, it’s important you speak with your accountant to choose the right ones for your short and long-term goals for tax savings.

The top 3 reliefs and deductions for business owners are:

Research and Development tax relief:

Research and Development (R&D) could save you thousands in tax relief. R&D tax credits are a government incentive designed to reward companies for investing in innovation. In short, any project that seeks an advancement in technology or improves an existing process, service, or product will qualify for R&D. The project doesn’t even necessarily need to be successful for you to claim tax credits. The tax credits come in the form of a corporation tax reduction or cash payment.

Talk to your A4G accountant if you think you may have carried out some R&D work. If you are eligible, you can claim for costs such as staff wages, 65% of subcontractor costs, software licenses, and materials used (such as water, fuel, and power).

Capital Allowances:

Capital allowances are a type of tax relief that allow you to deduct some or all of the value of an item from your profits before you pay tax.

You can claim capital allowances on:

• Equipment, like office computers
• Machinery
• Business vehicles, for example, vans, lorries or business cars

These are known as plant and machinery.

Patent Box

Patent Box is a scheme designed to encourage companies to keep and commercialize intellectual property in the UK. It allows companies to apply a lower rate of Corporation Tax to profits earned from its patented inventions.

Even if the patented element of a product or process is minor, 100% of the company’s profits made worldwide from the qualifying intellectual property income should qualify for the 10% patent box corporation tax relief.

If you have any questions on any of the reliefs or deductions above, please get in touch with your Principal Adviser or book a free 1-2-1 with us.

We will share another tax-efficient strategy next week.