Big companies have whole teams of financiers and accountants who can look over the papers and deal with yearly taxes.
Sadly, this is not the reality for most small companies and startup firms with limited resources. Using tax benefits and incentives is one of the best ways to accumulate finances by the end of the year.
That is why we offer several pieces of advice for struggling business owners on how to use these regulations to your advantage to fully maximise your tax benefits, while keeping everything legal.
Follow Tax Law Changes
One of the easiest ways to lower your taxes is to follow how the law changes. Each year, a new regulation can be passed, or an old one could be thrown out. It’s important to stay in the loop, to opt out of certain practices in time, or employ new ones. If you’re not a tax expert yourself, have someone knowledgeable help you make sense of new laws and regulations.
Certain employee compensations are, in fact, taxable. Depending on the kind of business you’re in, these can include:
- Using the company car (the mileage is tax-deductible, as it’s seen as a benefit)
- Paying bonuses and benefits
- Tip income
- Gross income and overtime pay
On the other hand, the non-taxable are transport and commuting benefits, as well as employer-provided meals. To be certain which bonuses or benefits are tax-deductible and which are not, it’s best to study the laws and regulations for your specific niche, as they tend to differ.
Family Leave Bonus
A family leave counts as any leave an employee takes to take care of their spouse who has a serious health condition, to care for their newborn, any event in which their partner or family member is required join the armed forces, and more.
Giving paid family leave to your employees can give you a tax credit, but only if you pay over 50% of the employee’s usual wage. Qualifying for the credit requires you to have specific conditions of paid leave in the employment contract, so make sure to study the necessary regulations.
Stock Up on Supplies and Assets
Business owners are incentivised to buy company supplies, vehicles or assets by counting them as tax write-offs at the end of the year. When you buy a new piece of equipment or an asset, you put it to use in the first year of owning it, which qualifies for a tax write-off that can lower your purchase price.
Furthermore, you can apply for a bonus depreciation, which creates an additional deduction, on the basis of the equipment’s assumed lifespan.
Business Rate Relief
Business rates are taxes paid by all commercial properties, such as business buildings, shops, restaurants, etc. The higher the property value, the higher the tax.
However, if you’re a small business, your ratable value is under a certain amount (depends on which part of the UK you’re located in, but goes around £12,000), and you are using only one property, you’re eligible for a business rate relief. So make sure to calculate your ratable value and see if you can sign up for this tax deduction.
Look Into Tax Credits
Every country has its own tax credit regulations. The government supports certain practices by offering tax write-offs or deductions for them. Some of these practices are going green by recycling, using low-carbon-emission equipment, providing for disabled employees, giving paid family leave, and in most cases, providing health benefits.
While some tax credits remain constant, there are many others that are being added or taken down from the list each year.
Consult a Tax Expert
No matter how much research you put into this issue, you will never be able to make full use of what tax regulations can offer. There are two options that can help:
- You can hire a tax expert who will give you advice on the best opportunities for your specific business, and the industry niche it is in.
- If you can’t afford several consultations, then do most of the research on your own and pre-plan for a single meeting, where you will ask specific questions, have the expert look over what you’ve done and offer some advice on how to improve.
Tax-Free Pension Scheme
Setting up a retirement plan for your employees actually returns tenfold. Private pension plans are tax-free, and serve as a top-up for the government-provided pension later in life.
These pension plans are bound to the account until the employee reaches at least 55 years of age.
Tax deductions, incentives and benefits are a great way to save company money, especially if you’re a startup, or a small business still finding its way.
While laws and regulations for them vary from country to country, perhaps the universally best way to save is to focus on employees and equipment.
Namely, employee incomes, pension schemes, and bonuses, and seeing what types of property are considered tax-deductible.