In order to manage your operations efficiently and to save on taxes, you as a small business owner can try and inculcate the following practices in your business operations to gain maximum tax benefit:

• Know your industry:

  To ensure that you don’t end up overpaying on taxes, it is very important to know and understand the industry you are dealing with and in order to do so, you must improvise a well-thought method to have continuous engagement with your trade body or association. You must also try to attend all the events and programs organised by the association. The best way to keep you updated about all the recent happenings of your trade body is to subscribe to its newsletter. Allowances like uniform allowance and several other dispensations are approved by HMRC which you can use depending on the industry you are in. And last but not least, your trade body is on your side so you must make the most out of it to understand your industry better.

• Use your allowances:

  This is the second step after you have attained a thorough knowledge of your industry because if only you have understood your industry well enough, you can utilise the applicable allowances. The size, type and structure of your business will decide which parts of tax legislation you need to consider. A lot of small business owners are clueless about allowances like annual investment allowances, personal allowances, dividend allowances, marriage allowances etc. and thus miss out on taking their benefits.

• Spend more time on your business:

  A small business owner has a lot on his plate and thus he needs to be very prudent regarding his time allocation. Spending more than the required time on tasks such as bookkeeping and accounting will not only take the fair share of your productive time but also make you a jack of all trades and master of none, which for sure is not a desired characteristic for success. Your business will benefit from you if you are spending time working on it while hiring competent professionals for tasks such as bookkeeping and accounting. . Also, you must try not to get into the feeling of “ I know it all” because chances are high that in situations where you may think that you are saving money, you are actually losing out by not claiming allowances and deductions you are eligible and entitled to.

• Make sure you are dealing with VAT correctly:

  For most small business owners, dealing with VAT in the right manner has been a sore area for years because while the majority of them have no idea if they are paying the right amount or not, a lot of small business owners don’t even know if a scheme called as Flat Rate Scheme even exists on the planet earth, which could otherwise be an unexpected source of profit. As the name suggests, under the Flat Rate Scheme, you have to pay a single, flat rate of VAT on your annual turnover and HMRC has its own list of flat VAT rates for different industries. Thus, you can choose the flat rate as per your industry and pay accordingly. Also, where HMRC refrain from claiming any VAT on the purchases made, you can keep the difference between the VAT you charge to your customers, which is usually 20%. Thus, having a regular VAT health check could prove quite beneficial for your business.

• Choosing your work location:

  HMRC has allowed generous tax savings for those who are self-employed and work from home and if you are a small business owner, you are self-employed in the eyes of HMRC, so you must be aware of tax-saving schemes. Being self-employed, you can claim either all or a certain percentage of the following expenses:

  • Mortgage interest
  • Health insurance premiums
  • Heat and light
  • Water
  • Landline and phone costs
  • Council tax
  • General household repairs and maintenance
  • Meals
  • Publications and subscriptions
• Meet your deadlines:

  In order to avail tax benefits, you as a small business owner must ensure that you are paying your subscriptions with the HMRC and Companies House well within the deadline. Meeting all deadlines becomes a lot trickier when things are not going as smoothly as you would like them to be, but even then you have to make sure that you deal with the situation as soon as possible because doing so will give you and your advisor, if any, buffer time to liaise and reduce the penalties for late payment interest.

• Meet your accountant:

  You have hired and paid your accountant to keep the company’s or business’s account in order but it doesn’t mean that your task is over. At the end of the day, it is your business so it is your duty to have a periodical meeting with your accountant to see if things are as they should be and address areas of concern, if any. Doing so will also keep your accountant under check and prevent him from going haywire and if you don’t talk to your accountant or if he is very busy giving you the time, change the accountant.

• Transfer assets:

  In order to save on tax, HMRC allows you to transfer some of your assets, savings and investments to your spouse or civil partner or to someone from your family who works in your business. However, you must be careful here so that you end up creating problems for those involved with regard to control or capital gains tax.

• Make plans in advance:

  HMRC encourages everyone to save on their taxes by doing advanced planning and as a small business owner; you need to assess your profits in advance in order to claim any deductions well within time before it is too late to do so. For example, if you have calculated your profits, you can see if buying any qualifying plant or machinery or adding to pension contributions has any positive effect on reducing your taxable profits.

• Plan your exit:

  As a small business owner, you must have a well-planned exit strategy in place because having so will not only increase your chances of realising the best value from your business but will also allow you to have a tax-efficient exit and thus reduce the burden of income, capital and inheritance tax, if applicable.