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Small Business: Tax Incentives

46869859 - taxes payment day graphic design with icons, vector illustration.If you were to ask a group of small business owners what tax incentives they can enjoy, you are likely to get different answers, as there are quite a few incentives out there and they can be quite confusing. Some may be relevant to you, others may not. To know more about what the UK government offers at present and what schemes are useful to you, it is best to speak with a professional accounting firm for Small Businesses in London like us. At Tax Agility, we can help to advise on tax incentives.


Popular tax incentives that are relevant to small businesses

  • Annual Investment Allowance (AIA) – this is for businesses investing in qualifying investment for up to £200,000.

Example: You’re a sole trader not registered for VAT. You just bought a used van for £2,000 to transport goods. Your profit for the year is £20,000 and this means you can claim AIA on the cost of the van, so your tax will be on £18,000 (which is £20,000 – £2,000).

If you’re VAT registered, you can claim AIA on the cost of the asset less any VAT you can reclaim on the asset.

  • Employment Allowance – introduced in 2014, this allows you to get up to £3,000 a year from the Class 1 National Insurance you have paid.

If you’re using XERO and already claimed the £3,000 Employment Allowance in the previous tax year, then XERO will automatically apply the annual balance of £3,000 in the current tax year.

  • Research & Development Tax Relief – designed to encourage SMEs to invest in R&D by reducing your taxable profit and thereby decreasing your corporate tax.

As a small business owner, you can deduct an extra 130% of your qualifying costs from your yearly profit – in addition to the normal 100% deduction – this makes a total of 230% deduction. Talk to us if you’d like to understand more about Research & Development Tax Reliefs, from what counts as R&D to the different types of relief.

  • Energy Technology List (ETL) – is a list of energy-efficient items which SEMs can purchase and benefit from single-year capital allowances.

Apart from these, there is also a range of Business Rates Reliefs – from Small Business Rate Relief to Relief for Pubs (in England with a rateable value of less than £100,000). Talk to us to find out more.

How important are Tax Incentives for a small business?

Tax Incentives are important for small businesses because they are an effective way to reduce your corporate tax bill, in addition to other ways like paying yourself tax efficiently.

To understand more and see how you and your small business can be tax efficient with tax reliefs, contact us today on 020 8108 0090 to arrange a complimentary, no obligation meeting.

To learn how the tax incentives for your small business, call your local London accountants Tax Agility on 020 8108 0090, or pop into one of our offices:

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