As an owner of a small enterprise, you are required to pay several taxes according to the performance of your business on time.
Therefore, there are several tax breaks available for SEMs to ease a load of tax in many ways. You Free up an amount of money for your commerce, diminished with a tax break by possessing the cash you need to pay.
In this blog, we have systemised a list of several types of tax breaks that are accessible to small enterprises. So let’s look into them…!
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What is meant by a Tax Break?
It could be a way for you to reduce your tax liability by considering things you spend cash on or contribute to your enterprise. A tax break is also known as tax relief. It is a government’s plan to help small business owners by ensuring that they have a maximum amount to spend on their business.
Tax breaks are also a way to motivate positive behaviors like investing in innovation and donating to welfare.
Enjoying the advantages of tax breaks doesn’t mean avoiding the tax or paying less than the taxes you own. You still have to pay your taxes fairly and have to contribute fully to the UK economy. In short, you can say that you are helped by several schemes to raise your take-home pay and company balance sheet.
Each tax break has its own set of criteria:
- Few tax breaks are industry-specific
- Few tax breaks are based on the line of your business, whether you are a self-employed person or a limited enterprise.
3 Tax Breaks- Available to SMEs
The 3- tax breaks available for the small and medium business are as follow:
1. Small Business Relief
To help ease the monetary load on the small enterprises, the Small Business Rate Relief Scheme (SBRR) was brought up by the Government of the United Kingdom in 2005.
You can get small business rate relief if:
- The rateable value of your property is less than £15,000
- Only one property is utilized by your commerce – you may get relief in the event that you employ more than one.
- You are not required to pay for business rate on a property having a rateable value of £12,000
- The relief rate goes down continuously from 100% to 0% for the properties, having a rateable amount of £12,001 to £15,000. For instance, if your property has a rateable value of £13,500, then you will get a 50% discount on the bills, and if your property has a rateable value of £14,000, then you will get a discount of 33%
- On the off chance that you employ more than one property at that point after getting the second property, you may keep receiving the existing help on your main property for a year.
- Even after this, you’ll be able to get the relief on your primary property only if the rateable value of the other properties isn’t over £2,899 and in the event that the overall rateable value of all your properties is less than £20,000 (£28,000 in London)
- You will get a small business relief even if you are not qualified for it. Your charge will be calculated by using a small commerce calculator if your property contains a rateable value underneath £51,000. The small business multiplier is 49.1p, and the standard multiplier is 50.4p. Multipliers are distinctive within the City of London.
- To apply for the small business rate relief, one should consult with the local council
Additional business rates relief is also provided to the enterprises. You can consult the GOV.UK website for more information.
2. Charity Donations
Individuals can donate to charity, and it is tax-free. You can receive tax relief if you donate through the following means.
- Donate through the Gift Aid
- Donate through payroll giving (directly from your pension and wages).
Charity Community and Amateur Sports Club (CASC) – are able to claim the actual rate of tax that donors have paid from HM Income & Customs on the off chance that they are enrolled for Gift Help.
This implies that a charity or sports club will receive an extra 25p for every £1 you contribute, and it will not cost you more. But, first, you need to register for Self Assessment and pay the income tax above the basic rate (20%) for claiming tax relief for charity donations. After that, you can claim back the difference between the tax you have paid on the contribution.
If you are not registered, you can call HM Revenue & Customs to inform them about your contribution to charity. The registered members can also get the Married couple Allowance.
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Payroll Giving Schemes – If a payroll giving scheme is provided by your employer or pension provider, then the contributions you give through this payroll scheme will be taken before the Income Tax is taken off.
You won’t need to pay the Income-tax on the money you contribute, but you need to pay the NICs.
3. Allowable Business Debts
On the off chance that you’re self-employed, your commerce will have different running costs. You’ll deduct a few of these costs to work out your assessable benefit as long as On the off chance that you’re self-employed, your enterprise will have different running costs. You’ll deduct a few of these costs to operate your taxable profit as long as they’re allowable debts. For instance,
Your business turnover is £60,000, and you claim £20,000 in allowable debts. Then you are required to pay tax only on the remaining £40,000.
Allowable debts include:
- Office costs (counting enterprise premises costs). Things you’d regularly utilize for less than two years, such as stationery, computer program and printer ink, as well as lease, rates, control and protection costs.
- Travel costs. Commerce car or van and travel costs, counting fuel, enlist charges, breakdown cover, protections, transport passages and remains.
Similarly in clothing, staffing, advertising & marketing, training course and all the financial cost of hiring are included in allowable debts.
Claiming tax reliefs for Allowable debts – On the off chance that you’re self-employed, allowable debts can be recorded on your Self Assessment tax return. The sum claimed will naturally be deducted from your assessable pay, but you are required to keep a precise record of purchases for up to six years.
In case you’re a subcontractor and have already paid your tax within the year, allowable debits will be reimbursed as a tax refund. There are some exemptions to be sure: even though:
- You will not be able to claim your tax for property or trading allowance if you use your £1,000 tax-free trading allowance.
- Allowable debts don’t incorporate the amount taken from your commerce to pay for a private buy.
- You can claim allowable debits for the business costs that are used for both personal and work use. For instance, “Your total cell phone bill for the year is £400. From this, you have spent £200 on personal calls and £200 on work. You can claim £200 allowable debits for the business costs.
- In case you have your enterprise, incurred expenses can be subtracted from the gained profits before tax.
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Quick Sum Up
We hope the highlighted details about the tax breaks prove to be helpful for you. Finally, we would sum up the discussion by saying that, whether you are running your own company or a sole trader and working from home, several tax breaks are available to help your commerce.
There are other tax breaks as well that are available to small and medium businesses e.g. Annual Investment Allowance (AIA), Employment allowance, Research and Development (R&D) Tax Relief, The Patent Box Scheme and Creative Industries Tax Reliefs (CITRs).
Getting benefits from these tax breaks can assist in freeing up cash that can be contributed to development openings.
Utilise this post, and the links are given to discover what’s accessible and work with a certified bookkeeper to assist you in claiming what you’re qualified for.
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