It's a challenging time to run your own business, and ways to ease the financial burden are always worth exploring. While there are many bills to pay when running a small business, there can be a number of ways to claim back some of the taxes you pay.
From reducing business costs to tax cuts, we've pulled together 8 tax reliefs small businesses can claim to help you determine if you can lower your tax bill.
1. Employment Allowance (National Insurance relief)
If you are an employer, you may be eligible for National Insurance relief of up to £4,000 (total benefit amount allowed per company, not per employee).
Claiming the Employment Allowance allows you to pay less employers’ Class 1 National Insurance each time you do a payroll until you reach the £4,000 threshold or until the end of the tax year, whichever comes first.
Which businesses are eligible?
- those with employees;
- those that pay Class 1 employers' National Insurance;
- those with employers’ Class 1 National Insurance liabilities of less than £100,000 in the previous tax year;
- charities are also eligible.
2. Annual Investment Allowance
If your company uses plant and machinery for business needs, it may count as a tax-deductible expense.
Are you eligible?
Items eligible for the Annual Investment Allowance (AIA) include:
- assets you use in your business, including cars;
- costs of demolishing plant and machinery;
- parts of a building considered integral, known as ‘integral features’;
- some fixtures – for example, fitted kitchens or bathroom suites;
- alterations to a building to install other plant and machinery (not including repairs).
3. Small business rate relief
Due to the COVID-19 pandemic, the government announced that retail, leisure, hospitality, and nursery businesses may not pay business rates for 2020-21. The business rates as a whole will be reviewed later.
Are you eligible?
The small business rate relief is available to businesses with properties with a rateable value of less than £15,000.
4. Research and development tax relief
Applying to claim back the research and development (R&D) tax relief could be an option if you work on innovative science and technology projects.
The success of the project is not obligatory to qualify you for the relief – the main aim is to research or develop and advance in the field.
SME R&D relief lets you:
- deduct an extra 130% of your qualifying costs from your annual profit, as well as the normal 100% deduction, to make a total 230% deduction;
- claim a tax credit if your company is making a loss, worth up to 14.5% of the loss.
Are you eligible?
You can claim small and medium-sized enterprises (SME) R&D relief if you have:
- fewer than 500 staff;
- a turnover of under 100 million euros or a balance sheet total under 86 million euros.
You may need to include linked companies and partnerships when deciding if you are a small or medium-sized business.
5. Creative industries tax relief
Creative industry tax relief is made up of the following eight Corporation Tax reliefs:
- Film Tax Relief
- Animation Tax Relief
- High-end Television Tax Relief
- Video Games Tax Relief
- Children’s Television Tax Relief
- Theatre Tax Relief
- Orchestra Tax Relief
- Museums and Galleries Exhibition Tax Relief
Are you eligible?
The government website says: «Your company must have responsibility throughout development, from the start of pre-production until the completion of the film, programme or game.»
«For theatrical productions, orchestral concerts or exhibitions, the company must be responsible for producing, running and closing the production.»
You will also need to take the British Film Institute (BFI) cultural test, which requires all films, animation, and TV shows or video games to be UK certified.
6. Seed Enterprise Investment Scheme
The Seed Enterprise Investment Scheme gives investors tax reliefs when they buy new shares in your company.
Are you eligible?
You are required to have a limited company to qualify for this type of tax relief.
7. Marginal Relief
If you are running your own limited company, you can apply for Marginal Relief to reduce to a minimum your corporation tax bill. This gives you a gradual increase in your tax rate between the small profit rate and the main rate.
Are you eligible?
To be eligible for the relief on your corporation tax your business profits before 1 April 2015 must be between £300,000 and £1.5 million.
8. The Patent Box
If you have your own business, the Patent Box may mean that you can apply a lower corporate tax rate to your profits on any patented invention that you own.
Are you eligible?
Your company will need to:
- be liable to Corporation Tax;
- make a profit from exploiting patented inventions;
- own or have exclusively licensed-in the patents;
- have undertaken qualifying development on the patents.
If you want to apply for tax relief then please contact Persona Finance (enquiries@personafinance.co.uk). We will have a consultation and help you to submit the application.
