Tax & Admin

Do You Qualify for Business Tax Relief?

Business Advice | 2 May 2023 | 12 months ago

There is a lot to think about when you run your own business, and tax is one of the major aspects. As a business owner, you need to keep on top of your taxes, and you need to know what to pay, how to pay and when to pay. For a lot of business owners, the amount of tax that needs to be paid at the end of the financial year comes as a huge surprise. Luckily, there are a variety of business tax relief options for you to take advantage of.

In the UK, business tax relief refers to the deductions or allowances that HMRC will allow you to claim on the amount of tax that you need to pay. This is a way to reduce your tax liability, which keeps more revenue within your business by ensuring that you have less tax to pay. There are a wide range of business tax relief options, some of which will apply to you, and some will not. This is why it’s important to know what you qualify for and how to apply, as you could be missing out on tax relief that you didn’t know you had. Below, we have taken a look at some of the most common forms of business tax relief

Small Business Rate Relief

Small business rate relief is there to help small businesses and startups manage their running costs. You qualify for small business rate relief if your property’s value is less than £15,000 and your business only uses one property. If your business property has a rateable value of £12,000 or less, you will not have to pay business rates. If your business property has a rateable value of between £12,001 and £15,000 you can still claim small business rate relief, but the rate will go down gradually to 0%.

If you have a second property, you will get to keep any small business rate relief on your main property for a year. After this time, you will not be eligible for it. If neither of your properties have a rateable value above £2,899 or the total rateable value of all properties is less than £20,000, you can continue claiming small business rate relief. If you are in London, this figure goes up to £28,000.

Employment Allowance

Claiming employment allowance allows you to reduce your tax liabilities by up to £5,000, which could save you a lot of money as a business. It works by allowing you to pay less employers’ Class 1 National Insurance each time you run your payroll. You can do this as many times as it takes the £5,000 to run out, unless the tax year ends before this. Class 1 National Insurance costs are one of the largest costs that small businesses have to pay, so qualifying for employment allowance can make a big difference.

Businesses and charities are able to claim employment allowance, but only if your employers’ Class 1 National insurance liabilities were less than £100,000 in the previous tax year. Those who employ a care worker, support worker or run an amateur support club are also eligible. If you are a public body or more than half of your work is in the public sector, you cannot claim employment allowance.

Annual Investment Allowance

If an item qualifies for annual investment allowance, you can deduct the full value from your profits before tax. This includes most plant and machinery, but does not include business cars or items given to your business. You can also not claim annual investment allowance on items you owned before you started using them for your business. The annual investment allowance is £1 million and this amount refreshes at the start of each accounting period.

R&D Relief

R&D relief – sometimes referred to as Research and Development relief – is available if your company is involved in innovative projects in science or technology. If you are researching or developing an advancement in your industry, you could quality, and it’s also available on projects that have turned out to be unsuccessful. You cannot claim R&D relief if the advancement is in the arts, social sciences, economics or humanities.

To qualify, the project must relate to your business’ trade in some way, and this can include projects that you intend to start based on the R&D relief. You need to showcase that you have looked for an advancement, had to overcome a relevant uncertainty or tried to overcome a relevant uncertainty, and that this couldn’t have been solved by a professional in the field.

Capital Allowance

With capital allowance, you can deduct some or all of the value of certain items from your profits before tax. Capital allowances can be claimed on equipment, machinery and business vehicles. More often than not, the value is what you paid for the item, and not the original price if you purchased it secondhand. You can also claim capital allowances for renovating business premises in certain parts of the UK, research and development, structures and buildings, intellectual property, extracting minerals and a handful of other things.

As you can see, there are a variety of business tax reliefs that you might be eligible for, and understanding them all can become confusing. This is especially true if you qualify for more than one, or if you are not confident at navigating doing your own business taxes. It’s often a good idea to consult an accountant or financial advisor before applying for business tax relief, to ensure that you are claiming everything that you should be.

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