12 Tax Saving Tips for Small Businesses [INFOGRAPHIC]
As a small business owner, there are many ways to save tax and become even more profitable in your business. However, with so much to do in your business and so many hats to wear, it can be difficult to keep track of which savings you are entitled to. With this in mind, our Senior Accountant, Sharon Wright, has put together this summary of 12 great tax-saving tips that you may wish to consider over the coming year. Whilst these individual savings may seem small, they can add up, especially if claimed every tax year and by each director (where permissible).
We have also created a handy infographic summarising this information:
Staff parties
Your company can spend up to £150 per head per tax year on annual events that are available to all directors and employees. The event must be annual, for example Christmas party or summer lunch, and the cost must not exceed £150 per attendee. You can hold several events provided each one is an ‘annual event’ and all staff are invited. Spouses and partners can be included as attendees and therefore you can budget for £300 per couple within the concession. You should not exceed the limit of £150 per head, otherwise the whole amount will be taxable as a benefit in kind. See HMRC’s guidance on staff entertaining.
Trivial benefits
A close company can pay trivial benefits to a director or employee, or a member of their family, up to a maximum of £300 per tax year per director/employee. Each benefit must cost no more than £50, must not be cash or exchangeable for cash, and must not be a reward for services or in any way obligatory. Note that if the benefit exceeds £50, the full amount is taxable, not just the excess over £50. This may not seem worth the effort but could save tax and NI of £167 pa for each director who is a higher rate tax payer (assumes 6 benefits of £50 each paid). See HMRC’s guidance on trivial benefits.
Mobile Phone
If you arrange for your phone contract to be in the company name, rather than your personal name, then the company can pay for the full ongoing costs. No deduction required for personal use.
Eye test
If you regularly use a computer for business the company can pay for the cost of an annual eye test. Glasses that are prescribed specifically for VDU use, and which are not used for any other purpose, may also be claimed and paid for by the company.
Annual medical check-up
The company can pay for the cost of an annual health check or screening for a director or employee.
Pension advice
The first £500 of the cost of seeking pension advice may be paid by or claimed from the company.
Marriage allowance
If you are married or in a civil partnership and your income falls within the basic rate band of £12,570 and £50,270, and your partners income is less than £12,570, then your partner may transfer up to £1,260 of their personal allowance to you, which is worth £252 in tax savings. The person with the lowest income should make the claim online. You can backdate a claim up to 4 years. Once a claim has been made it will automatically renew each tax year until either you cancel it, or the marriage ends. Those earning above £11,310 but below £12,570 can still transfer £1,260 of allowance but will themselves become liable to pay tax on the income over £11,310. The partner still makes a tax saving of £252, but any extra tax paid by them will reduce the overall savings made. See HMRC’s guidance on the marriage allowance.
Employment allowance
If most of your work is for Private Sector clients, and you have two directors/employees each earning a salary of more than £9,100, or one employee who earns more than £9,100, then you may be entitled to claim the Employment Allowance. If your only income during the year is under IR35 you cannot claim. This allowance gives relief for up to £5,000 of Employers NI due by the company. Competex can arrange to recover this for you. If you think you may be eligible and have not yet made a claim, please let us know. Note that you can make a claim for prior years in which you think you were eligible (up to 4 years after the end of the tax year in which the allowance applies). See HMRC’s guidance on the Employment Allowance.
Child benefit
If you or your partner are in receipt of child benefit, you may wish to retain your taxable income below £60,000 if possible. This would avoid the child benefit tax charge which arises when one of you earns more than £60,000 (child benefit is completely withdrawn if either of you earn £80,000 or more). Taxable income is all salary, interest and dividends that are taxable less relevant deductions such as personal pension contributions and Gift Aid. See HMRC’s guidance on the child benefit tax charge.
Dividend allowance
An individual may receive dividend income of up to £500 tax free in 2024/2025.
Staff training
Training that relates to the business being carried on, to enhance or improve your existing skills, can be paid for through the company. CPD courses would be applicable here. Any training that creates new skills, such as a degree course, would not generally be allowable so please check with us if you are unsure
Small trading receipts
There is a £1,000 allowance for small trading receipts and property income. The £1,000 applies to each type of income, so you can potentially be exempt from paying tax on the first £2,000 of such income. Restrictions apply, so please consult with your personal tax advisor at Competex. See HMRC’s guidance on small trading receipts.
For more information on any of the above, please contact your accountant at Competex.