How to Maximise Tax Reliefs for SMEs

Running an SME may appear easy, but it is not a small feat. It means continuously juggling with cash flow and chasing invoices. However, there is no need to worry because the UK tax system offers some tax reliefs. These are designed to lessen the tax liabilities of small businesses and fuel their growth. So, if you are running an SME and want to maximize your tax reliefs, it is time to know and understand the available tax reliefs.

R&D Tax Credits

Is your business doing something innovative? It may be in developing a new revolutionary product or anything related to technology or maybe just significantly improving an existing product. In such cases, you will become eligible for the R&D tax relief. Many SMEs assume that this tax credit only applies to tech firms, but this is not the case. You can claim up to 20% of your R&D costs as a cash credit. So, it is undoubtedly worth exploring. Given some conditions, even if you are running an R&D-intensive business making a loss, you can still claim a tax credit of 14.5%.

Capital Allowances – The Hidden Gem

Did you purchase some necessary equipment or machinery for your business? If yes, capital allowances are the hidden gem that you must uncover. You can reduce your taxable profits significantly by claiming the capital allowances. The best thing about this allowance is that the annual investment allowance (AIA) enables you to claim a reduction of up to £1 million per year.

Make the Most of Employment Allowance

This allowance enables eligible employers to decrease their annual national insurance liability by up to £5,000. So, it is high time that you should consider taking advantage of this allowance. With this money, you can have more cash, which is crucial for running a small business.

Small Business Rates Relief

Does your business run from your property whose rateable value is less than £15,000? If yes, rejoice because your business is eligible for the small business rates relief. Here lies the catch because if your property’s rateable value is less than £12,000, you can get a chance to have 100 % small business rates relief leading to massive savings each year. However, you need to contact your local council.

Do Dividend Tax Planning

Since dividends are taxed at a lower rate than salary, consider paying yourself through a mix of salary and dividends. Soon, you will realize that you can reduce your overall tax liability. This is applicable only if you are running a small business through a limited company.

Claim Your Business Expenses

Always claim your business expenses, such as work-related travel expenses, staff expenses, telephone bills, and so on to reduce the taxable profits. Even expenses on professional development courses related to your business, accountancy fees, and legal fees. In short, any expenses genuinely related to your business purposes can be claimed, but you must have all the records.

Let’s admit the fact that maximizing tax reliefs for small and medium-sized enterprises need planning and understanding. You must have all the records of your income and expenses and yes compliance with the HMRC is a must. Consider hiring a proactive and experienced accountant who can suggest the best tax-saving strategies for your business. At Coreadviz, we have a large team of accountants to help you save big in a stress-free manner.