In April 2023, the rate of corporation tax in the UK increased to 25% for companies with profits over £250,000 . The rate remains 19% for businesses with taxable profits of less than £50,000 and for everyone else, marginal tax relief will be applied, reducing the main corporation rate.. For many business owners, they are likely to be paying more in taxes when their tax return is completed. So how can you make sure your business is tax efficient?
There are a number of tax efficient strategies for business owners to include, and we’ll be looking at each of these over the next few weeks.
Tax efficient strategies for business owners
Tip Number One: Claim for all deductions and reliefs
To minimise your corporation tax liability, the first step is to make sure you are claiming for all the reliefs and deductions that you can, and you are accurately recording your expenses. There are lots of options available on reliefs and deductions so please do consult with your accountant to choose wisely. Three of the most common deductions and reliefs are:
Capital allowances can be claimed on the cost of assets used for your business. Depending on the asset, you might be able to claim this as a one-off payment or you may need to spread the cost of the asset over several years. Some examples of capital assets would be office equipment and computers, or work vehicles.
Research & Development tax relief:
To encourage Research and Development the UK Government introduced R&D Tax Credits in 2000.
This has proved highly popular with almost 90,000 companies claiming back £6.6bn in tax relief in 2021. R&D Tax Credits could bring your company thousands of pounds in tax relief but are quite specialised so again, please talk to AIMS about your situation. If you’re eligible, you can include staff wages, contractor costs, software licenses and energy costs.
This scheme is administered by HMRC and is designed to reward innovative UK companies. Patent Box incentivises a company to keep their IP within the UK and rewards them for doing so by reducing the corporation tax on profits resulting from qualifying IP income to 10%.
Even if the patented element of the product or process is minor, 100% of a company’s worldwide profits arising from qualifying IP income should qualify for the 10% Patent Box corporation tax relief.
Our accountants are business owners just like you – so they understand what you’re going through. Talk to us and let’s see if we can help.