Tax is an essential expense for the business that must be incurred every year. With this regular expense, businesses keep looking for ways to reduce their taxes.
You can reduce your taxes by following all the rules of taxpaying. If the companies adhere to the rules of taxpaying, they can get their taxes reduced.
Every business has to be a taxpayer and be regular in their tax payments. Any missed payments can lead to consequences. You cannot avoid paying taxes, but you can find ways to reduce your corporation tax.
You should have a proper understanding of the tax system and also sufficient time to plan your finances efficiently.
The mandatory tax
The corporation tax decreases and appeals to many businesses with the passing times. Despite the decreasing tax, you still can find more ways to reduce your taxes and save a significant amount of money in your business.
Many businesses fail to claim their expense and face huge taxes. To pay off these vast taxes, they have business loans for self-employed.
If they borrow loans, it can come as a burden on the business and increase unnecessary expenses for the business. It is good to follow the proper rules to reduce your taxes to reduce your unnecessary business expenses.
Ways to reduce tax
- Claim all your business expenses regardless of the size
Irrespective of the size of your expense, small or big, you should claim all the amounts. There may be many small expenses in a business, such as a taxi fare, lunch expense, and many more, but you have to keep a record of all the expenses.
Although it can be a tedious task to maintain the record of every expense, this is an essential step for your tax saving.
These expenses may seem small. Once you start adding up these small expenses, it can lead to a huge amount that can be claimed to save your tax money. This can be a significant amount for your business; hence, maintain the record for every expense you make.
If you do not claim all your expenses, you are moving towards wasting your money. You can use many online accounting programs to keep a record of your expenses and claim this money towards the end.
Every company has a different business expense, and their record-keeping for the expense can be different. It is essential to comprehend the expenditure for your business.. A small cost for you may be a considerable cost for other businesses.
Remember that whatever you include in your business costs should be wholly business-related and not personal use.
- Do not forget to claim your car mileage
One expense that your business can miss is your car mileage expense. Since it is not considered an expense, it can be missed while claiming your expenses, and HMRC has an official authorized mileage rate.
If your staff is using a car or as a business owner you are using the business car, you can claim this expense to be on a tax-efficient side.
According to the HMRC, the authorized rate for your car mileage is 45p per mile for up to 10,000 miles. Beyond 10,000 miles, the rate is 25p.
- Use your business phone
You can make use of your business phone instead of your personal phone. You can also tell your staff to make use of the business phone.
If you make use of your business phone, you get a tax deduction on it, and it includes the phone cost, call rentals and other costs.
- Give a Christmas party to your employees
You may find it a weird way to host a Christmas party for your employees, but it is an excellent way to save your tax. There are specific guidelines for this party that you have to follow.
If the per head expenditure is less than £150, the business can consider claiming a tax deduction.
- Pay salary to the directors
Salary is classified as a business expense, and the best way is to give the directors and owners a salary as it will be counted as an expense. The right way is to pay the directors a combination of compensation and salary.
You have to be careful while preparing the wages and expenditures. If there is a financial constraint, you can borrowshort-term business loans, which will help you pay off the salaries.
- Consider your tax relief for R&D
Your business may be making innovations in its product and services. But this can be missed out for government tax relief for innovation.
Your product and service innovation may be eligible for tax relief. If your business makes losses, you can claim that loss too for a tax credit, and it will be paid in cash.
- Employee share scheme
It is beneficial for you to offer shares to your employees. This will help you with a tax deduction, and this will give you a dual benefit of a tax deduction and increase staff retention.
- Be creative and get a tax relief
If your business is working in a creative industry, you can benefit from your tax.
Various schemes are applied to this creative industry. These schemes vary in their rules, and you can seek professional advice to choose the best scheme for your business.
Conclusion
Following these steps can make your business save corporation tax. You can seek professional help from accountants and other professionals to guide you through the ways to claim your expenses and get a tax deduction.
With the proper guidance, you will get the right claim that your business is entitled to.